International Tax Review is part of the Delinian Group, Delinian Limited, 8 Bouverie Street, London, EC4Y 8AX, Registered in England & Wales, Company number 00954730
Copyright © Delinian Limited and its affiliated companies 2023

Accessibility | Terms of Use | Privacy Policy | Modern Slavery Statement

Unconditional recovery of VAT on construction expenses on third party real estate

Sponsored by

eygreece.png
Supreme Administrative Court of Greece paves the way

Nikoletta Merkouri of EY in Greece explains how the Supreme Administrative Court of Greece has paved the way for businesses to secure VAT recovery on expenses incurred for construction expenses on third party real estate.

The Supreme Administrative Court of Greece upheld, in decision 1108/2021, that the right of businesses to deduct input VAT on expenses incurred for construction works, improvements, and additions performed on third party real estate remains, even if the taxable person is not entitled – at the time the expenses are realised – to use such property for a period of at least nine years. 

The right of the business to use and perform works on third party real estate may derive from a legal relationship with the property’s owner, like a concession or leasing agreement, or even on the basis of adverse possession rights. 

This judgment was issued by invoking predominantly the Court of Justice of the European Union’s (CJEU) decision in case C-98/07 (Nordania Finans A/S and BG Factoring A/S). In this case, the CJEU upheld the position that the right given to member states based on Article 20 paragraph 4 of the Sixth Directive (provision now found in Article 189 of Directive 2006/112/EC) to define the concept of capital goods, applies only for the purposes of applying Article 20 paragraphs 2 and 3 of the Sixth Directive (provisions now found in Articles 187 and 188 of Directive 2006/112/EC), which set out the rules relating to adjustments of deductions. 

These provisions of the Directive have been transposed into Article 33 of the Greek VAT Code (Law 2859/2000). More specifically, availing of the right granted by Article 189 of the Directive, Article 33 paragraph 4 of the Greek VAT Code includes a definition assimilating construction, improvement works and additions on third party real estate to capital goods, on the condition that the business may use the property based on a legal relationship, with a duration of at least nine years. 

However, contrary to the judgment, and according to the practice followed by the Greek VAT Administration to date invoking guidelines included in Circulars issued back in 1992, the taxable person is required to hold legal possession of the third party property for at least nine years at the time when the construction works, improvements, and additions are performed. Otherwise, the business is not entitled to validly deduct or request the refund of the corresponding input VAT. 

However, according to the judgment, based on this practice, the Greek VAT Administration has – in essence – set an inadmissible time condition to the exercise of the right to deduct VAT, in the context of Article 30 of the Greek VAT Code (in so far as transposing the provisions of Articles 167 and 168 of the Directive into the Greek VAT Code). 

The direct impact of this development is that there would appear to be now grounds for businesses that incur expenses for construction works, improvements, and additions on third party real estate held for a period of less than nine years, to support input VAT deduction, despite the interpretation and approach followed thus far by the Greek VAT Administration. 

Furthermore, businesses may also examine the possibilities of filing an interest-bearing refund request for relevant input VAT amounts previously not deducted or claimed for refund, considering the applicable statute of limitation provisions or other restrictions, depending on the case. 

 

 

 

Nikoletta Merkouri

Director, EY Greece

E: nikoleta.merkouri@gr.ey.com

 

more across site & bottom lb ros

More from across our site

The German government unveils plans to implement pillar two, while EY is reportedly still divided over ‘Project Everest’.
With the M&A market booming, ITR has partnered with correspondents from firms around the globe to provide a guide to the deal structures being employed and tax authorities' responses.
Xing Hu, partner at Hui Ye Law Firm in Shanghai, looks at the implications of the US Uyghur Forced Labor Protection Act for TP comparability analysis of China.
Karl Berlin talks to Josh White about meeting the Fair Tax standard, the changing burden of country-by-country reporting, and how windfall taxes may hit renewable energy.
Sandy Markwick, head of the Tax Director Network (TDN) at Winmark, looks at the challenges of global mobility for tax management.
Taxpayers should look beyond the headline criteria of the simplification regime to ensure that their arrangements meet the arm’s-length standard, say Alejandro Ces and Mark Seddon of the EY New Zealand transfer pricing team.
In a recent webinar hosted by law firms Greenberg Traurig and Clayton Utz, officials at the IRS and ATO outlined their visions for 2023.
The Asia-Pacific awards research cycle has now begun – don’t miss on this opportunity be recognised in 2023
An intense period of lobbying and persuasion is under way as the UN secretary-general’s report on the future of international tax cooperation begins to take shape. Ralph Cunningham reports.
Fresh details of the European Commission’s state aid case against Amazon emerge, while a pension fund is suing Amgen over its tax dispute with the Internal Revenue Service.