Disposal by an individual of real estate used for business activities is subject to VAT (CJEU ruling of July 11, 2024 in case C-182/23 Makowit).
The case in question involved a natural person – a farmer, registered as an active VAT taxpayer, engaged in milk production. This taxpayer was acquiring land plots for the purpose of expanding his farm, with the acquisition not subject to VAT.
As a result of the governor’s decision, the ownership of part of the land plots on which the taxpayer’s farm is located was transferred to the State Treasury in order to implement a road investment. At the same time, the governor initiated proceedings to determine the amount of compensation due to the taxpayer on this account.
As a result, the taxpayer applied for a tax interpretation, taking the position that it could not be considered a VAT taxpayer with regard to the transaction in question, but the Director of the KIS disagreed.
The case went before the NSA, which decided to refer the question to the CJEU for a preliminary ruling. The NSA noted that, on the one hand, the expropriated plots of land constituted a component of the taxpayer’s agricultural holding (i.e., they were used for economic activity within the meaning of VAT regulations). On the other hand, the NSA cited the CJEU ruling in Case C-180/10 and C-181/10 Slaby, Kuć, from which it follows that a natural person disposing of land is considered a VAT taxpayer if he or she actively engages in real estate transactions, while in the present case such circumstances did not occur (on the contrary, the taxpayer was forcibly deprived of the property).
In considering the SAC’s question, the CJEU noted that the transferor acts as a VAT taxpayer, in principle, when he does so in the course of his business activity.Therefore, if the expropriated plots of land were used for his business activity (in this case, farming), he should be considered a VAT taxpayer to that extent. In this regard, the fact that the transferor did not actively engage in real estate transactions is irrelevant.
In the judgment in question, the CJEU rightly distanced itself from the ruling in C-180/10 and C-181/10 Slaby, Kuć, which referred to a different factual situation (i.e., the disposal of land after its exclusion from agricultural production). In the case in question, on the other hand, at the time of delivery, the property was to be part of an agricultural holding used for business.
Although the judgment in question concerns a specific delivery transaction (i.e., by way of expropriation), the conclusions presented by the CJEU may have a much broader meaning.Based on the CJEU’s position, it can be argued that the disposal of property used for business activities within the meaning of VAT causes the seller to act as a VAT taxpayer, also in the case of “ordinary” supplies (i.e., made at the will of the taxpayer and not just by expropriation).