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Brokerage Services Still VAT Exempt When Linked to Property Sales

Brokerage Services Still VAT Exempt When Linked to Property Sales
Global
16 Oct 2012

The current practice in certain countries is to consider brokerage services that are linked to the sale of properties via share deals, as VAT exempt. This practice relies on a VAT exemption foreseen in the European VAT legislation that is applicable to transactions (including negotiation) in shares and other securities. The practice was, however, recently threatened by a case brought to the European Court of Justice (C-259/11 DTZ Zadelhoff vof vs. Staatssecretaris van Financi?n). Taxand Luxembourg investigates this case, its outcome and the effect these results will have on private equity and real estate investment funds.

In the case of DTZ Zadelhoff vof vs Staatssecretaris van Financien, the Court ruled that the VAT exemption should be applied to transactions which are designed to transfer shares in companies that are holding properties. However, the exemption should not be available in Member States which have implemented the option to consider shares (or any equivalent interests giving the holder rights of ownership or possession over (part of) immovable property) as tangible property (Article 15, ?2, c) of Directive 2006/112/EC).

The table below provides a list of countries where it should be possible to benefit from a VAT exemption on brokerage fees, within the framework of share deals. We however draw your attention to the fact that certain conditions must be met to apply the VAT exemption. Such conditions depend on the country concerned.

Country

Implementation of the article 15, ?2, c) of the Directive 2006/112/EC?

Austria

No. However in case of a transfer of co-ownership shares of land, the transfer of the co-ownership shares has to be regarded as a supply of immovable property (not applicable to incorporated companies).

Belgium

No

Bulgaria

No

Cyprus

Yes

Denmark

Yes

United Kingdom

No. However, the exemption will not have applied in respect of intermediary services related to property.

France

Yes

Finland

Yes. However, in practice, the sale of such shares is not subject to VAT.

Germany

No

Greece

No

Hungary

No

Ireland

No

Italy

No

Latvia

No

Luxembourg

No

Netherlands

No

Romania

No

Slovakia

No

Spain

No

Sweden

No


 


 

Taxand's Take


This ruling brings a breath of fresh air to an increasingly taxed world. A restrictive position in such a case would have severely endangered one of the VAT system's objectives, which is to ensure legal certainty on the application of VAT based on the nature of the transaction. When selling properties via share deals, businesses should therefore check whether, based on their domestic legislation, a VAT exemption can be obtained on brokerage fees. And if so, significant amounts of money could be saved.

Your Taxand contacts for further queries are:
Christophe Plainchamp
T. +352 26 940 280
E. christophe.plainchamp@atoz.lu

Nicolas Devillers
T. +352 26 940 204
E. nicolas.devillers@atoz.lu

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