THE CASE BRIEFLY STATED
In the case C-71/18, KPC Herning Ltd. asked the High Court, Vestre Landsret, to rule on the practice of the tax authorities. In this connection, the HighCourt, Vestre Landsret, asked the European Court of Justice for a preliminary ruling.
The Advocate-General, who is presenting his Opinion before the European Court of Justice on the matter, concluded on 19 March 2019 that the collection of VAT of a site on which a building had been erected, was not compatible with Articles 12 and 135 (1), section 1 (j) and (k) of the Council Directive 2006/112/EC of 28 November 2016 and the common system of value added tax.
In particular, the Advocate-General emphasized: (i) that the building was intact at the time of the transfer; (ii) that no demolition work had begun; and (iii) the objective circumstances at the time of transfer for the future use of the building could still be changed.
On 4 September 2019, the European Court of Justice delivered judgment in the case, stating that the tax authorities had charged VAT in violation of EU law, considering there was no building site.
Based on the decision of the European Court of Justice, the High Court, Vestre Landsret, must conclude the case.
LUND ELMER SANDAGER’S COMMENT
We can conclude from the judgment of the European Court of Justice and the Advocate-General's suggested settlement that a property with an existing building cannot be considered as a building plot by the tax authorities based on the parties' intention alone, and that more is required before VAT must be added.
Furthermore, we must assume that the tax authorities are changing their practice in this area and that the tax authorities will be able to reopen the cases in which VAT was collected in violation of the EU law.
If you are considering transferring property, part of which is part of the body of contracts, it is important from the beginning that the right strategy is made to ensure a successful transfer.
Based on many years of advice in connection with the transfer of real estate, including properties with existing buildings, Lund Elmer Sandager has gained specialist expertise in this field, including agreements on turnkey contracts.
Partner, Attorney Christian Petri and Assistant Attorney Jonas Bøndergaard are always available for a discussion of your options without any obligation, and we tailor our services to suit your business needs.
If you have been charged VAT in connection with the sale of property with an existing building, we are also at your disposal for a discussion without any obligation about your possibility of repatriation and repayment of VAT.