Where there is a so-called ’ transfer of a going concern’ in respect of any real estate subject to VAT (also referred to as a Section 37d/transfer of a totality of assets), the Court of Appeal in ’s-Hertogenbosch holds that previous agreements made between the seller and the Dutch Tax Authorities devolve to the buyer as well.

At the time that the real estate was transferred, parts of the second and fifth floors had not been occupied at all or were first used less than two years ago. If those parts could be regarded as ‘independent units’ for VAT purposes, the value attributable to those units would be exempt from real estate transfer tax (RETT). However, the seller had previously made an agreement with the Dutch Tax Authorities that each floor was to be regarded as an independent unit (in other words: could not comprise several smaller units). The Court of Appeal in ’s-Hertogenbosch ruled that the application of Section 37d/totality of assets means that the buyer is bound by the seller’s agreement made with the Dutch Tax Authorities.

Many real estate transactions qualify as a transfer of a going concern. For this real estate transaction practice, the ruling confirms that such agreements with the Dutch Tax Authorities and positions adopted by the seller in respect of the real estate to be acquired should be looked for during the due diligence process.