The Supreme Court ruled that the buyer of real estate is not also bound by specific agreements made between the seller and the Tax and Customs Administration if there is a 'transfer of a totality of assets' for VAT purposes (in practice also known as 'transfer of a going concern' or 'application of Section 37d of the Turnover Tax Act (Wet OB)').

Question of law and importance

The seller of an office building had agreed with the Tax and Customs Administration to treat each floor as an independent immovable property for VAT and RETT purposes. The buyer wanted to deviate from these agreements and determine the the tax treatment per unit in order to be able to apply the so-called concurrence exemption on transfer tax for some units.

Assessment by the Supreme Court

According to the Supreme Court, Section 37d of the Wet OB, the provision that concerns the transfer of a totality of assets, does not provide a basis for the position that the acquirer is bound by the agreements made regarding the immovable property.

The Supreme Court referred the case to the Arnhem-Leeuwarden Court of Appeal. The Supreme Court ruled that in determining whether part of an immovable property can be regarded as independent, the basic principle is that physically separated immovable property, or a property that is not physically separated, but that can be legally or physically distinguished, must be taken into account separately when it is (or could be) used separately.

Practical implications

In practice, this means that in the purchase process, when Section 37d of the Wet OB applies, it must be taken into account that the Tax and Customs Administration is not obligated to also apply agreements made concerning the immovable property with the transferor for the transferee. Hence, the transferee may possibly have to make new agreements with the Tax and Customs Administration about the immovable property following the transfer.