ECJ judgments

The ECJ has interpreted the concept of ‘building land’

C-594/23. – Lomoco Development and others | An improved land with concrete foundations qualifies as ‘building land’ within the meaning of the VAT Directive.

The plaintiff in the background case acquired an immovable property, used formerly as a campsite, and divided the property into sixteen plots. The plaintiff had the connections for electricity, water, heating and sewerage installed on some of the lands and concrete foundations were also made on these lands for the purposes of developing residential properties on them. Those foundation works were completed before 1 January 2011. The plaintiff sold the plots to another Danish company and the latter resold them to individual customers.

The plaintiff treated the plots as ‘new buildings’ for VAT purposes as the Danish law provided for VAT-exemption on the sales of any immovable property until 31 December 2010, under a ‘standstill clause’, the legislator however repealed the VAT-exemption on the sales of building land and new building with the effective date of 1 January 2011. According to the transitory rules, the sales of new buildings were only subject to VAT if the construction began on or after 1 January 2011. The moment at which a new construction is deemed to begin is the time when the foundations start to be cast.

Since the foundation works in scope were finished before 1 January 2011, the plaintiff declared VAT-exempt sales under the former regulations. The Danish tax authority reclassified the plots to ‘building lands’ and assessed VAT on the sales. The case was brought before the ECJ. In its judgement C-594/23., the court pointed out that for the purposes of the VAT directive, the first occupation (or the completion) of the building is relevant when it comes to decide whether it is a ‘new building’. This criterion should be fulfilled when “the product was likely to leave the production process and enter into the consumption sector.” The concrete foundations of a residential property are not sufficient for occupation, the plots in question should therefore be classified as ‘building lands’. The improved land, per-se, not be treated as ‘new building’ as it is covered by the concept of ‘building land’ under the VAT Directive.

Full English text of the judgement

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