Global

Details

  • Service: Tax, Global Indirect Tax, Global Compliance Management Services
  • Type: Regulatory update
  • Date: 7/25/2012

The Netherlands - VAT exemption for intermediary services on sales 

July 25:   The Court of Justice of the European Union (CJEU) held that intermediary services provided with respect to the sale of shares in companies directly or indirectly holding real estate (“real estate entities”) are exempt from value added tax (VAT).

The case is: DTZ Zadelhoff vof v. Staatssecretaris van Financiën, C-259/11 (5 July 2012)

Background

A Dutch company provided real estate services. In addition to providing intermediary services in respect of the real estate itself, the company also acted as an intermediary for sales of shares in real estate entities.


With respect to the subject case, the company received two sets of instructions from the vendors:


  • Find buyer(s) for the shares in the real estate entity. The sale of the real estate held by the real estate entity was explicitly excluded.
  • Find buyer(s) for the real estate or for the shares in the real estate entity.

In both situations, the buyers acquired the shares in the real estate entity.


At issue was how the services provided by the Dutch company were to be categorized for VAT purposes—(1) as intermediary real estate services (and thus subject to VAT); or (2) as intermediary services in respect of shares in a real estate entity (and thus exempt from VAT).

CJEU judgment

The CJEU concluded:


  • The intermediary services provided in respect of the sale of shares were VAT-exempt services.
  • Although it was not yet clear at the time the instructions were given whether the ownership of the real estate itself or the shares in the real estate entity were to be transferred, this fact was not relevant.
  • The relevant element was the objective nature of the service that ultimately took place.
  • A service in respect of shares is to be treated as such and therefore would be regarded as a VAT-exempt service.

KPMG observation

Many shareholders in real estate entities are not entitled, or only have a limited entitlement, to deduct VAT. If an intermediary has to charge VAT to a shareholder, this VAT will be an additional expense. Now that such intermediary services in respect of the sale of shares are found to be VAT-exempt, shareholders will not face a liability for VAT that is fully or partially non- deductible. However, the exemption does mean that the service provider’s VAT deduction entitlement will be limited.


Read this July 2012 report prepared by the KPMG member firm in the Netherlands: Intermediary service for sale of shares in real estate entity is VAT-exempt service



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1801 K Street NW
Washington, DC 20006.
 

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