EU: CJEU referral on whether sale of real property qualifies as transfer of going concern for VAT purposes (Netherlands)
Whether sale of real property used solely for VAT-exempt activities qualifies for relief under Section 37(d) of the Dutch Value Added Tax (VAT) Act
The Supreme Administrative Court on November 21, 2025, referred preliminary questions to the Court of Justice of the European Union (CJEU) regarding the circumstances in which a sale of real property used solely for VAT-exempt activities qualifies for the relief under Section 37(d) of the Dutch Value Added Tax (VAT) Act (corresponding to Article 19 of the EU VAT Directive) for transfers of a going concern.
Summary
The taxpayer, a project developer, purchased an office building and converted it into residential apartments. The taxpayer then sold the building, with apartments rented on a VAT-exempt basis for about three and a half months, to a property investor. The taxpayer took the position that it was entitled to treat the sale as a transfer of a going concern under Section 37d of the Dutch VAT Act such that, although the taxpayer would not be entitled to recover VAT on the all-in building costs because the building was leased to the tenants on a VAT-exempt basis, no non-recoverable VAT was due on the higher selling price paid by the buyer. The tax authority argued that the transfer was subject to VAT because it constituted a supply of a building within two years of a conversion involving “essentially new construction.”
The Arnhem-Leeuwarden Appeals Court in 2022 held that the transfer was subject to Section 37d, and an Advocate General of the CJEU in 2024 advised the Supreme Administrative Court to dismiss the cassation proceedings initiated by the Deputy Minister of Finance.
Unable to reach a definitive conclusion, the Supreme Court referred the following preliminary questions to the CJEU:
- Does the relief in the EU VAT Directive cover a supply of real property only used for VAT-exempt economic activities, such that the seller has not received a VAT recovery right, and therefore is that supply exempt from VAT under Article 136 of the EU VAT Directive, or otherwise under Article 135(1)(j) of the EU VAT Directive (VAT-exempt sale of old real property)?
- If so, for the purposes of applying the relief, is it sufficient that the real property is rented out by the seller and supplied in that rented-out state, so that objectively speaking an independent business is being transferred? Or must the intention with which the seller developed the real property and started renting it out after its completion (i.e., to sell the property) also be taken into account?
Read a November 2025 report prepared by the KPMG member firm in the Netherlands