This case concerned the classification of a site as a building site and the principle of the protection of legitimate expectations. A seller had delivered a plot of land with an old transformer house on it and the foundation of an old wall. Upon delivery, the seller had invoiced VAT based on the view that a building site had been delivered, but had not paid that VAT based on the view that land with existing buildings had been delivered exempt from VAT. The tax inspector imposed an additional tax assessment.

Question of law and importance

With regard to the appeal of the seller, the Supreme Court had to decide whether the site qualified as undeveloped land and whether the Court of Appeal was justified in basing its appeal judgment on case law of the Court of Justice (ECJ) dated after the date of the delivery of the plot of land.

Assessment by the Supreme Court

According to the Supreme Court, the judgment of the Court of Appeal that the remains of buildings do not preclude a qualification as undeveloped land does not constitute an error of law, because the Court of Appeal had established that the nature and size of the buildings in relation to the size of the site are so small that the renovation must be considered negligible.[1]

According to the Supreme Court, the interested party is in principle right as regards the position that it could rely on the case law of the Supreme Court applicable at the time of supply, even though it followed from later case law of the ECJ that it concerned the delivery of undeveloped land. However, according to the Supreme Court, an appeal to the principle of the protection of legitimate expectations can only succeed if the entrepreneur has not also claimed a right to deduct VAT in respect of goods and services that can be attributed to the delivery of the land. In other words, the entrepreneur must act consistently. The Supreme Court referred the case to a different Court of Appeal.

Practical implications

In practice, the important point is that the supply of a site with buildings, of which the extent is limited in terms of nature and size compared to the size of the site, may constitute delivery of undeveloped land. On the basis of the current regulation, if the acquirer subsequently intends to build on that land, it will qualify as the delivery of a building site .