Municipal court: VAT and gratuitous supply of land

The taxpayer had purchased land and claimed a VAT deduction only on the fee for the intermediation of the purchase, not on the purchase price. Subsequently, the taxpayer contributed the land into a business company as a non-monetary (in-kind) contribution. The question was whether the VAT deduction claimed should be regarded as a deduction claimed in connection with the acquisition of the property. Subsequently, the question was how to determine the taxable amount, should the in-kind contribution be subject to VAT.

 

According to the law, a VAT liability arises on an in-kind contribution in the form of goods if the person making the contribution had claimed a VAT deduction, even just partially, upon the acquisition of these goods. The municipal court held that the acquisition cost of a property includes all costs incurred in acquiring it, including the costs of intermediating the purchase. Therefore, a VAT deduction relating to intermediary services also constitutes a partial deduction upon the acquisition of the property. This conclusion gives rise to an output VAT liability in respect of the in-kind contribution of the land into a business company.

 

In determining the taxable amount, the court relied on the principles set out in the VAT Directive and the VAT Act, which regulate the procedure for gratuitous supplies of goods (including contributions into a business company) as follows:

According to the municipal court, for a gratuitous supply of purchased property, the taxable amount should be determined based on its the residual value, which is generally to be understood as the net book value reflecting its actual wear and tear. In the present case, therefore, the tax base shall the purchase price of the land, taking into account its residual value at the time of the contribution.