On September 30, 2021, the ECJ issued its judgment in the case C-299/20 (Icade Promotion Logement SAS).
The case is a French referral asking whether Article 392 of the VAT Directive is to be interpreted as reserving the application of the ‘margin scheme’ to transactions for the supply of immovable property the purchase of which has been subject to VAT, without the taxable person who subsequently resells the property having the right to deduct that tax, or does it permit that scheme to be applied to transactions, the purchase of which has not been subject to VAT, either because that purchase falls outside the scope of VAT or because it falls within the scope of VAT but is exempt.
Context: Directive 2006/112 / EC – Article 392 – Margin tax regime – Scope – Supply of purchased buildings and land for resale – Taxable person not having been entitled to deduction on the occasion of the acquisition of buildings – Resale subject to VAT – Concept of “building land”
Article in the EU VAT Directive
Article 392 of Council Directive 2006/112/EC
Article 392 (Derogation)
Member States may provide that, in respect of the supply of buildings and building land purchased for the purpose of resale by a taxable person for whom the VAT on the purchase was not deductible, the taxable amount shall be the difference between the selling price and the purchase price.
Facts
Icade Promotion Logement (a parcel company, hereinafter: the applicant) has declared the assignment of building sites to private individuals in 2007 and 2008 under the VAT system on the profit margin. The petitioner has asked the tax authorities for a refund of the tax paid on it. The tax authorities refused this, after which the applicant submitted the dispute to the tax court. The applicant is appealing in cassation against the second judgment of the cour administrative d’appel, in which that court, without judging admissibility, declared the application for refund of the company unfounded.
Consideration:
Second, the question arises whether Article 392 of the VAT Directive should be interpreted as excluding the application of a profit margin tax on supplies of construction sites in the following two situations: the taxable person has converted uncultivated land into construction sites between acquisition and resale , whether the characteristics of the land have changed between the time of acquisition and that of resale by the taxpayer, for example by division into lots or the execution of works to enable connection to various facilities (roads, drinking water, electricity, gas, sewer , telecommunications). Those questions determine the resolution of the present case and, in the absence of any case-law of the Court clarifying the subject-matter and scope of the provisions,
Questions
Is Article 392 of [Council] Directive [2006/112/EC] of 28 November 2006 [on the common system of value added tax] to be interpreted as reserving the application of the margin taxation scheme to transactions for the supply of immovable property the purchase of which has been subject to VAT, without the taxable person who subsequently resells the property having the right to deduct that tax, or does it permit that scheme to be applied to transactions for the supply of immovable property the purchase of which has not been subject to VAT, either because that purchase falls outside the scope of VAT or because it falls within the scope of VAT but is exempt from it?
Is Article 392 of Directive [2006/112] to be interpreted as excluding the application of the margin taxation scheme to transactions for the supply of building land in the following two cases:
where that land, purchased as land that has not been built on, becomes building land in the time between it is purchased and resold by the taxable person;
where that land, in the time between it is purchased and resold by the taxable person, is developed, in the sense that it is divided into parcels or works are carried out in order to install services (roads, drinking water, electricity, gas, sewage, telecommunications)?
AG Opinion
(1) Article 392 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax must be interpreted as allowing the application of the margin taxation scheme to transactions for the supply of building land both where its purchase was subject to value added tax (VAT), without the taxable person who subsequently resells it being entitled to deduct that tax, and where its purchase was not subject to VAT on the ground that that transaction did not fall within the scope of VAT, where the price at which the taxable dealer purchased those goods includes an amount of input VAT which was paid by the original (non-taxable) vendor. However, that provision does not apply to transactions for the supply of building land the initial purchase of which as land which had not been built on was exempt from the scope of that directive.
(2) Article 392 of Directive 2006/112 must be interpreted as meaning that the margin taxation scheme cannot apply to transactions for the supply of building land where that land was not built on when purchased by the taxable dealer.
The derogating margin taxation scheme provided for in Article 392 does not apply to the resale of land which, in the time between it being purchased and resold, is developed, in the sense that works are carried out in order to install various services (roads, drinking water, electricity, gas, sewage, telecommunications). However, Article 392 applies in the case where, in the time between the initial purchase of building land and its resale, the alterations to that land are limited to its division into parcels.
Decision
1. Article 392 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax must be interpreted as allowing the margin scheme to be applied to transactions involving the supply of building land both where the purchase thereof was subject to value added tax (VAT), without the taxable person who sold it being entitled to deduct that tax, and where the purchase of that property was not subject to VAT even though the price at which the taxable dealer purchased those goods incorporated an amount of VAT, paid as input VAT by the initial seller. However, apart from in the latter situation, that provision does not apply to transactions involving the supply of building land on whose initial purchase no VAT was paid, either because that purchase is not subject to VAT or because an exemption applies.
2. Article 392 of Directive 2006/112 must be interpreted as precluding the application of the margin scheme to transactions involving the supply of building land where that purchased land which has not been built on has become, between the time of its purchase and the time at which it is resold by the taxable person, building land. That provision does not, however, preclude the application of the margin scheme to transactions involving the supply of building land where that land has been subject, between the time of its purchase and the time at which it is resold by the taxable person, to alterations such as its partitioning into lots or the carrying out of works for the connection of those lots to grids and networks, including, inter alia, the gas and electricity networks.
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