ECJ judgments

The recent judgment of the CJEU concerns the interpretation of the concept of economic activity and the VAT liability of marital property communities

C-213/24 – Grzera

The preparation of land for parcelling, utility installation, and sale constitutes a “preparatory activity” for VAT purposes, even where the landowners entrust such tasks to a third party. Spouses may jointly act as a taxable person in the form of a “civil law partnership.”

The plaintiffs in the main proceedings are a married couple from Poland, who jointly owned agricultural land as part of their marital community of property. The couple engaged an agency to handle the process of removing the land from agricultural designation, reclassifying it for residential use, parcelling it, installing utilities, and eventually selling the plots as building plots. The agency agreement stipulated a minimum sale price; the agency’s remuneration was calculated as the difference between this minimum and the actual selling price, from which it had to cover its own expenses. The Polish tax authority classified the sale of the building plots as taxable transactions and assessed a VAT liability against the couple. The couple argued that they had not carried out any business activity, merely managed their private assets.

The competent regional court referred the matter to the CJEU for a preliminary ruling to clarify whether, under such circumstances, the couple’s actions constituted an “economic activity,” and whether they could jointly act as a taxable person. In its judgment, the CJEU clarified that the concept of economic activity under EU law includes all activities of producers, traders, and service providers, in particular, the exploitation of tangible or intangible property for the purposes of obtaining income therefrom on a continuing basis. In this context, it is relevant that the spouses took “significant steps towards property sales,” which, by their nature, are to be considered preparatory steps toward a continuous income-generating activity.

The Court further noted that – unless excluded by the terms of the agency agreement – the ultimate economic risk rests with the property owners, since failure by the agency would prevent the sale of the building plots. Consequently, the couple’s actions formed an integral part of an economic activity subject to VAT. With respect to the issue of joint representation by the spouses, the CJEU pointed out that the EU VAT system recognizes a civil law partnership as an independent taxable person, which may also include a marital property community, provided that the spouses cannot act individually.

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