The key question in this case is whether an extensively refurbished property constitutes the supply of a newly finished property and is consequently subject to VAT. In the case in question, the inspector argued that an old building subject to real estate transfer tax was transferred rather than a finished property.

A situation involves a finished property if 'essentially a new building' has been created. This is tested by taking a man on the street as a starting point. However, on 3 August 2016, the Arnhem-Leeuwarden Court of Appeal ruled that that man may also enter the property to determine whether this is the case (in the case in question, the entire refurbishment took place behind the monumental façade) and on that basis ruled that the refurbishment had led to a finished property. The court therefore ruled that the supply of the property at the time of the refurbishment was subject to VAT.

In cassation, the Advocate-General (“AG”) concluded otherwise by stating that the seller’s performance in connection with the supply must also be taken into account rather than just the end result of the refurbishment. As such, it must first be assessed whether the seller effected a single complex transaction, possibly consisting of multiple elements or multiple transactions. The Court of Justice has issued clear-cut criteria for the purposes of conducting that assessment. It follows from those criteria that all circumstances in which the transaction took place must be taken into account (see the Don Bosco Onroerend Goed judgment for example) and that the parties’ declaration of intent (supported by objective data) with regard how the transaction must be treated for VAT purposes must be borne in mind when qualifying a performance (see the Woningstichting Maasdriel judgment for instance).

The AG inferred from the objective data in the case at hand that the seller had undertaken in respect of the buyer to carry out refurbishment work. However, according to the AG, that did not by definition mean that the situation involved the supply of a building before first occupation. According to the AG, for that to be the case, the refurbishment work carried out by the seller now or in the future would have to result in a finished property. The AG is of the opinion that based on the facts in this case, the parties lacked a common intention to construct a new building and that the refurbishment of the building in question had not yet reach such an advanced stage at the time of supply that it could be considered ‘essentially a new building’. We must now await the Dutch Supreme Court’s judgment.

Source: Advocate-General Ettema, 12 December 2017, ECLI:NL:PHR:2017:1415