VAT Newsletter 8/2012
The European Court of Justice („ECJ”) has ruled on the case SC Gran Via Moinesti SRL (C-257/11)
The dispute in this case refers to the adjustment of the VAT related to the acquisition of land and buildings thereon erected, with a view to demolish the buildings and carry out a construction project on the respective land.
In 2007 GVM has acquired a plot of land and the buildings thereon erected, with the aim to demolish the constructions and to develop a residential complex.
GVM deducted the VAT related to all the land and buildings purchased.
Following a tax audit performed in 2009, the tax authorities considered that GVM was liable to adjust the VAT related to the demolished buildings, VAT which had been deducted by GVM at the moment of acquiring goods.
ECJ considers that, a company which has acquired land and buildings constructed on that land, for the purposes of demolishing the buildings and developing a residential complex on the land, has the right to deduct the VAT related to the acquisition of those goods.
Thereby, the demolition of buildings acquired together with the plot of land on which they were erected, which is carried out with a view to developing a residential complex in place of those buildings does not result in an obligation to adjust the initial deduction of VAT relating to the acquisition of those buildings.