As a general rule, the letting of real estate is exempt from VAT. The lessor and lessee can, however, opt (subject to conditions) for VAT taxed lease. Such an option for a VAT taxed lease is subject to certain (formal) requirements, which have underwent changes several times over the years. The importance of meeting these (formal) requirements has, in line with previous case law, been underlined once again by a recent judgment of the Court of Noord-Nederland.

Question of law and importance

A dispute arose about whether a correct option for a VAT taxed lease is exercised if no written and signed statement is included in the lease agreement according to which statement the lessee declares that he uses the leased property for purposes for which there is a full or virtually full right to deduct VAT. This statement was only issued by the lessee four months after the commencement date of the lease. Without a valid option for a VAT taxed lease, the landlord could not deduct VAT on investments in the property.

Ruling of the Court

The Court concludes that at the commencement of the lease not all (formal) requirements for a VAT taxed lease were met due to which the lease is exempt from VAT. As a result, the landlord cannot deduct VAT.

Practical implications

It follows from this ruling that it pays off to ensure that all (formal) requirements for a VAT taxed lease are met (in time) when concluding the lease agreement, so that (successive) lessors are not faced with any surprises after the fact.