Netherlands - Supreme Court requests preliminary ruling
Supreme Court requests preliminary ruling from ECJ on VAT exemption for transactions in shares and other securities by company active in the real estate sector.
On 22 April 2011, the Dutch Supreme Court (Hoge Raad) requested a preliminary ruling from the Court of Justice of the European Union (ECJ) in Case No. 09/00760 concerning the interpretation of the VAT exemption for transactions in shares and other securities in the case of a partnership active in the real estate sector. Details of the case are summarized below.
(a) Facts. The Taxpayer is a partnership which is active in the real estate sector provided services to companies which indirectly own real estate. These services resulted in the transfer of shares of real estate companies by the principal to third persons.
The Taxpayer argued that it has carried out exempt transactions with respect to shares, whereas the Tax Inspector took the view that the Taxpayer has carried out taxable transactions with respect to real estate.
(b) Legal background. Art. 13(B)(d)(5) of the Sixth VAT Directive (Art. 135(1)(f) of the EU VAT Directive) provides for an exemption of transactions:
- including negotiation but not management or safekeeping, in shares, interests in companies or associations, debentures and other securities; but
- excluding documents establishing title to goods, and the rights or securities.
(c) Decision. The Supreme Court observed that the taxpayer acted as a real estate broker, who intended to find a purchaser for the real estate. However, that purchaser would not obtain the legal ownership of the real estate, but the shares of the companies directly or indirectly owning the real estate. Therefore, the Court, referring to the decision of the ECJ in Skandinaviska Enskilda Banken AB Momsgrupp v. Skatteverket(Case C-540/09), considered that it could be held that the activities of the taxpayer constitute transactions in shares, because the aim of the transactions was to change rights and obligations with respect to securities.
Consequently, the Supreme Court decided to hold the proceedings and requested a preliminary ruling from the ECJ on the following questions:
(1) Does Art. 13(B)(d)(5) of the Sixth VAT Directive have to be interpreted as meaning that it includes the activities carried out by a taxpayer, which concern the (indirect) transfer of the real estate owned by the companies concerned, merely because the activities were aimed at and resulted in the transfer of shares of the companies concerned?
(2) Does the exception concerning the exemption of Art. 13(B)(d)(5) of that Directive also apply if a Member State has used the option provided for in Art. 5(3)(c) of the Sixth VAT Directive to classify certificates and shares entitling to the ownership or use of real estate as tangible assets?
(3) If the preceding question must be answered in the affirmative, does the term certificates and shares include shares in companies which directly or indirectly by means of (sub)subsidiaries own real estate, regardless whether they exploit the real estate or use it for a different company?
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