A municipality agreed with a foundation, that the municipality would have a school building built. After completion of that project, the foundation would become the legal owner and user of the school building. The costs of the building itself were borne by the municipality. The foundation paid for the costs of the furnishing and of its extra wishes. In the end, the municipality was reimbursed 9.2% of its costs related to the school building from the foundation. The municipality wanted to deduct the VAT on the costs of the building as input tax. But the tax authorities did not agree.
The Dutch Supreme Court reasons that it is generally known that municipalities carry out economic activities related to immovable property and that they are VAT entrepreneurs for this purpose. The fact that in some cases a municipality does not stipulate a (cost-effective) compensation for such activities does not exclude the presence of an economic activity.
Source: Taxence
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