VAT and transfer tax news
The Dutch courts of appeal and the Dutch Supreme Court have been busy. This newsletter addresses some noteworthy judgments.
Business succession scheme: court of appeal confirms transfer tax exemption
On 15 August 2017, the Court of Appeal of Arnhem-Leeuwarden (“the Court”) ruled that the transfer of an enterprise with a real estate portfolio within a family is exempt from transfer tax. In doing so, the Court upheld the judgment rendered by the District Court of Noord-Nederland on 12 July 2016.
According to the letter of the law, in the transfer tax arena, the business succession scheme (“BOR”) does not apply to the transfer of a family business in the form of a public limited liability (“NV”) or a public limited liability company (“BV”) with a real estate portfolio, but only to enterprises subject to personal income tax. However, the Court has confirmed that it is apparent from legislative history and the structure of the law that this unequal treatment was not intended. As such, the Court ruled that the transfer of an NV or a BV with a real estate portfolio to an immediate family member is also exempt from transfer tax, provided that a material enterprise is conducted in the NV or BV. The Court explained that if that is the case, no reason exists to treat this transfer differently from the transfer of an enterprise subject to personal income tax, since the acquisition of the real estate portfolio would be exempt from transfer tax in the latter case.
Do parcels of land designated for a golf course constitute building land?
On 16 June 2017, the Dutch Supreme Court rendered a judgment concerning the question of whether the acquisition of parcels of land intended for constructing a golf course is exempt from transfer tax. The Supreme Court set aside the judgment rendered by the Amsterdam Court of Appeal [Amsterdam Court of Appeal, 19 May 2016, ECLI:NL:GHSHE:2016:1701] and remanded the case to the Court of Appeal of ’s-Hertogenbosch.
This case concerned parcels of land bought by a golf club, which were intended to be used to construct a golf course ("the parcels"). Prior the acquisition, the parcels underwent treatment, which included the removal of grassland and crops, excavation of the land and the construction of a road and a car park for construction vehicles. The golf club subsequently bought an adjacent parcel of land ("adjacent parcel") on which it constructed a club house and a car park. The golf club adopted the position that the parcels qualified as building land on the transfer date and that consequently no transfer tax was due in connection with the acquisition of the parcels.
The Supreme Court stated that the premise is that a golf course is not a structure within the meaning of the Dutch VAT Act 1968. As a corollary, the Supreme Court ruled that if the parcels are examined independently, they do not qualify as building land within the meaning of the VAT Act 1968, since that would require the parcels of land to be designated as substrate for a structure.
The Amsterdam Court of Appeal ruled that the parcels (and the golf course yet to be realised) are not suitable for independent use. In coming to this conclusion, the court examined the matter from a player’s perspective. From an average consumer’s perspective, the golf course does not lend itself for independent use without the club house. As such, the parcels qualified as building land on the transfer date. However, the Supreme Court is of the opinion that the Amsterdam Court of Appeal applied the wrong standard by examining the matter from an average consumer’s perception. The Supreme Court is of the opinion that properties that can be distinguished from each other from a legal and physical perspective, must be examined separately if they can be used individually. The Court of Appeal of ’s-Hertogenbosch will have to examine whether the golf course can also function without the existence of the club house, which question we believe can be answered in the affirmative.