When the sale of personal assets (e.g. building land) exceeds the limits of personal sphere and becomes entrepreneurial business which triggers VAT burden

The Court of Justice of European Union (hereinafter: The Court) issued judgment in case C-213/24 which is particularly interesting for individual persons who place on the market certain immovable assets not acquired as business assets. The judgement is about land that was inherited from parents and held as personal property for more than 20 years before the decision to sell it was made. It is evident from the judgment that the VAT burden can arise even when selling personal property, which has been passively held as personal property for a long time.

According to the Court’s interpretation, it is important to analyze what steps and actions are taken to sell personal assets, as well as how these steps and actions are carried out. It is necessary to determine whether organized and active steps and actions are taken, and to what extent certain actions or steps can be considered comparable to those taken by entrepreneurs. It is also clear from that judgment that, where a professional service provider is engaged to develop land for the purpose of selling it, the conclusion as to VAT may also depend on the conditions of such an engagement.

When it is planned to sale assets (e.g. land) that have initially been acquired as personal assets and that have subsequently been held as personal assets until the sale decision is made, the judgment of the Court provides some guidance on how to determine whether activities prior to the sale (which are aimed at the intended sale) should be regarded as activities which have crossed the boundary of the personal sphere, that is to say, which should be regarded as entrepreneurial activities and which may therefore give rise to the obligation to pay VAT.

This should be taken into account in advance, in order to avoid the risk that some property (e.g. building land) will be sold without VAT because the seller is of the view that this is sale of personal property that is outside the scope of VAT, and that the competent authorities will subsequently, analyzing all the steps and actions that preceded the sale, determine that the seller was obliged to calculate and pay VAT to the state budget on the basis of that sale.