Real estate: New practice for VAT exemption
A new ruling from the National Tax Tribunal allows for a broader interpretation of the term "real estate". It is no longer only traditional and functional buildings that are exempt from VAT on a sale.
Previous practice for VAT exemption of real estate has emphasized the importance of a functional property.
In a new ruling, the National Tax Tribunal has now stated that a paved parking area is a fixed structure that is covered by the VAT exemption for real estate. The decision opens up for a broader interpretation of the term "real estate" and makes it possible to reclaim VAT on sales in similar situations.
The parking space is exempt from VAT
The National Tax Tribunal's decision concerns the sale of an asphalted parking area with marked parking spaces, light poles and drains as well as a technical shed with electrical installations.
The area had been used for parking for more than 5 years and was therefore included in the concept of "old real estate".
Previously, the Danish Tax Agency had given a binding answer stating that the sale should be considered a sale of a building plot subject to VAT. The binding answer was appealed to the National Tax Tribunal, which changed the answer and stated that the sale of the parking area was covered by the VAT exemption - regardless of what the purpose of the area was.
Could previous sales have been exempt from VAT?
The practice we know today is thus gradually being expanded so that not only traditional and functional buildings are covered by the VAT exemption.
In the future, this probably means a more comprehensive practice, but also that we can look at previous sales and assess whether they could have been VAT exempt.
The decision from the National Tax Tribunal also states that the assessment of whether a sale of real estate is subject to VAT or exempt from VAT must be made at the time of sale, regardless of what the property will subsequently be used for.
More information
If your company needs advice on VAT, taxes and duties related to real estate, or if you need us to help you look at future or past sales, you are welcome to contact inforevision's tax department. You can also read more about us here.
