In both cases, the transaction was concluded by the sale of all the shares in the companies. The intention of the seller in the first transaction was a sale of the real estate by selling the shares in the company owning the real estate. In the second case, the seller did not mind whether the sale would be made by an asset deal or a share deal. In the end, the sale was made as a share deal.
As a real estate agent, the services of DTZ Zadelhoff consisted of valuing the buildings involved, searching for an appropriate buyer and assisting in negotiating the sales price, which was (almost) exclusively determined by the value of the real estate.
The seller in the first transaction was established in Sweden. The seller in the second transaction was established in the Netherlands. DTZ Zadelhoff charged no Dutch VAT to either of them for its services regarding the sale of - what turned out to be - the shares.
DTZ Zadelhoff reasoned that the transaction would be exempt (negotiation in shares) or, with regard to the first transaction, taxable outside the Netherlands (based on the ‘main rule’: taxable where the recipient of the services is established). The Dutch tax authorities were of the view that the exemption did not apply and that the services were taxable in the Netherlands (based on a specific rule: taxable where the real estate is located) and imposed an assessment. It upheld this assessment in a decision after DTZ Zadelhoff appealed against the assessment.
The Dutch Court of Appeal upheld the decision of the tax inspector. The Dutch Supreme Court is not sure about the VAT qualification of the services provided by DTZ Zadelhoff. Even though these services are typical for a real estate agent, the services were aimed at (or resulted in) the sale of shares (change of ownership of the shares).
Background information Dutch VAT Act on this point
The Netherlands has chosen not to implement Art. 5(3)(c) of the Sixth Directive (now Art. 15(1)(c) of the EU VAT Directive), which allows member states to regard as tangible property shares or interests equivalent to shares giving the holder thereof de jure or de facto rights of ownership or possession over immovable property or part thereof. Under the EU VAT rules, the relevant exemption (negotiation in shares) does not apply to transactions relating to the shares "as mentioned in Article 5(3)". The Dutch Supreme Court is unsure whether this part of the relevant provision (the exception to the exemption) only applies if Article 5(3) has actually been implemented.
If the exception to the exemption also applies if Art. 5(3) has not been implemented, the Dutch Supreme Court is not sure how to interpret “rights or interests equivalent to shares giving the holder thereof de jure or de facto rights of ownership or possession over immovable property or part thereof” as mentioned in Art. 5(3)(c). It therefore asks the European Court of Justice (ECJ) to clarify whether "shares or interests equivalent to shares giving the holder thereof de jure or de facto rights of ownership or possession over immovable property or part thereof" in Art. 5(3)(c) only refer to shares in a company that is exploiting the real estate as a business, or whether is also applies to shares in a company that owns real estate that is used (utilised) by other group of companies.
Questions referred
The Dutch Supreme Court has referred the following questions to the ECJ:
Must Article 13B(d)(5) of the Sixth Directive 1 be interpreted as also covering transactions, such as those carried out by the interested party, which in essence relate to the immovable property held by the companies concerned and its (indirect) transfer, solely on the ground that those transactions were aimed at, and resulted in, the transfer of the shares in the companies?
Is the exception to the exemption contained in the second indent of Article 13B(d)(5) of the Sixth Directive also applicable if the Member State has not availed itself of the possibility provided by Article 5(3)(c) of the Sixth Directive of considering shares or interests equivalent to shares giving the holder thereof rights of ownership or possession over immovable property to be tangible property?
If the previous question must be answered in the affirmative, must the aforementioned shares or interests equivalent to shares be understood to include shares in companies which, directly or indirectly (by means of (sub-) subsidiaries), own immovable property, regardless of whether they exploit it as such or whether they utilise it in the context of a different type of undertaking?
Impact for the business / possible implications
This is a very relevant case for any business involved in transactions in real estate. The question is whether the services provided by the real estate agent in this case qualify as “services connected with immovable property, including the services of estate agents and experts” or as “negotiation in shares”, as well as whether the exemption could also apply to these types of shares. The answer to these questions will determine the place of supply of such services as well as whether these services are exempt.
