1. 1 VAT on real estate In general and international business case Bas Opmeer Alexander Michelutti Athens, 3 February 2011

2. 2 Agenda General questions 3 Output cases 5 Output cases – tax free 9 Output cases – reverse charge11 Input cases – some topics14 The Case15 Relevant considerations18 Place of service19 One service or separate services24 Immovable property services25 Calculation of the relevant fee26 Page

3. 3 General questions

4. 4 Distinguish output and input supply of goods or services General questions (2)

5. 5 (Generally) place of supply = place of the real estate ( “ situs ” ) German and Netherlands point of view Output cases

6. 6 1.Question: What is a supply of goods or services in case of a real estate? Only the supply in close economic relation to real estate, e.g. –sale of real estate –letting and leasing of real estate (also Hotel rooms and Camping) –development of real estate ( e.g., architecture, engineering) German and Netherlands point of view Output cases (2)

7. 7 1.Question: What is a supply of goods or services in case of a real estate? (cont.) Not ( e.g. ): –sale of the shares of real estate companies –advertising in newspapers –financing of the acquisition of real estate –legal- and tax-consulting in questions of a real estate (in Germany: except notarization, i.e. situs related) German and Netherlands point of view Output cases (3)

8. 8 2.Question: Is the supply VAT free? Here: Sale or letting and leasing of real estate German and Netherlands point of view Output cases (4)

9. 9 B2B Sale Reverse charge (foreign and domestic supplier) „ sale of a going-concern “ taxable and (optional) liable to VAT not taxable taxable, but VAT-free B2C German point of view Output cases – tax free

10. 10 B2C B2B Letting and Leasing taxable, but VAT-free taxable and liable to VAT taxable, but VAT-free option to VAT possible (Germany: new buildings min. 95% VAT-able use of unit) no option to VAT German and Netherlands point of view Output cases – tax free (2)

11. 11 3.Question: Is there a reverse charge procedure applicable? Depending on: Type of supply Place of establishment of supplier German point of view Output cases – reverse charge

12. 12 B2B construction services taxable and liable to VAT construction area both „ B “ = construction area no construction area max. one „ B “ = construction area reverse chargeno reverse charge supplier foreign supplier German point of view Output cases – reverse charge (2) B2C reverse chargeno reverse charge

13. 13 Other services ( e.g. letting and leasing) Only, if the supplier is a foreign company German tax authorities: in case of letting an leasing of German real estate  supplier is a domestic company (only) for reverse charge purposes German point of view Output cases – reverse charge (3)

14. 14 VAT-return in cases of mixed output supplies (VAT-liable and VAT-free)? Where is the place of supply in cases of a foreign investor? Is the domestic real estate a PE for VAT-return purposes? Input cases – some topics German and Netherlands point of view

15. 15 The case  UK based real estate investment fund  Owns property in Germany, Netherlands, Denmark via SPV’s in this countries  SPV’s (investee companies) each own separate buildings in their own jurisdiction; or outside of their own jurisdiction  UK parent company (referred to as “Head Office”) and local office perform services to the investee companies

16. 16 The case (2) Investment fund SPV Investor + Service

17. 17 The case (3) Relevant services to be recognised  acquisition services  Management reporting  Property management and leasing services  Cash management  Statutory reporting  Tax compliance  Valuations  Insurance and risk management

18. 18 Relevant considerations  Place of service: B2B, or Immovable property (including the services of estate agents and experts and services for the preparation and coordination of construction work)  Place of business;  One service or separate services

19. 19 Place of service  B2B services are taxed at the place of business of the receiver of the services Seat of the business activities Permanent address Address of usual residence  Immovable property: place where the property is located

20. 20 Place of service (2) Relevant discussion  If (part of the) services are to be considered as B2B services Seat of business activities/operations SPV’s: Relevant factors: Registered office of the business Place of its central administration Place where the management meets Place where general policy of that business is determined

21. 21 Other relevant factors: Place of residence of the main managers Place where general meetings are held Place where the administrative and accounting papers are kept Place of banking transactions (Source: Working paper VAT committee EC no 619; see also ECJ 28 June 2007 case C-73/06/Planzer) Not: registered office Place of service (3)

22. 22 Questions in this case:  Actual seat of business activities in state of registered office  Actual place of management  SPV owns and operates the property  Day to day business is ran locally  It is very relevant how the management structure is organised Place of service (4)

23. 23 Services related to immovable property:  Exception to the main rule  In this case very relevant because of the fact that several SPV’s own property outside of their jurisdiction  Registration of the supplier of the services of the services necessary? / : reverse charge applies  in fact same as B2B no listing Place of service (5)

24. 24 One service or separate services  In this case there is a combination of services Are separate services to be considered Is one of the services predominant Absorption Is it possible to split up the separate services

25. 25 Immovable property services / : restrictive interpretation  Factual connection between service rendered and property  Directly connected with the property  Includes services of experts and real estate agents

26. 26 Calculation of the relevant fee Point of departure  Head office and local office perform at an asset management fee of x basis points (%)  Break down available  transfer pricing calculations  Can this be used?  - is this fair market value/market price - historical cost  NL: Dutch High Court tends towards transfer pricing calculations

27. 27 Bas Opmeer Partner FSV Accountants + Adviseurs Hogeweg 43 5301 LJ Zaltbommel, The Netherlands b.opmeer@fsv.nl www.fsv.nl Phone: +31 418 579 679 Fax: +31 418 579 688

28. 28 Alexander Michelutti Tax consulting for medium sized to large companies and its shareholders, including implementation and defense of tax efficient structures and forensic advice. VAT projects in banking, finance, real estate, public sector and engineering industry. Deputy-Head of VAT Centre of Competence German tax advisor ( Steuerberater ) Director alexander.michelutti@ebnerstolz.de Phone: +49 711 2049 13 73 Fax: +49 711 2049 12 20