Indirect Tax News - December 2020

Can input VAT incurred on services which have also benefited a third-party be deducted? (Vos Aannemingen BVBA – case C-405/19)

Facts of the case

The Vos Aannemingen BVBA case (C-405/19) concerns a real estate developer, Vos Aannemingen (the taxable person), who constructs and sells apartment buildings. The apartments are built on land belonging to third parties. When an apartment is sold, the third parties sell the shares in the land subject to registration duties (such transactions are out of scope of VAT) and the taxable person sells the building subject to VAT.

In the case, the taxable person deducted all the input VAT relating to advertising, administrative costs, and estate agents' commissions in the framework of the VAT taxable sales of new apartments. The Belgian Tax Authorities challenged the taxable person’s deduction of input VAT on the ground that these expenses also benefited the third-party owners of the land on which the apartments sold were erected and such sales are exempt from VAT. According to the Belgian Tax Authorities, the taxable person could deduct the VAT relating to the expenses at stake "only insofar as it related to the sale of the buildings constructed by him". Given the differences between the taxable person and the Tax Authorities regarding the amount of input VAT that is allowed, the Belgian Court of Cassation sought a preliminary ruling from the Court of Justice of the European Union (CJEU).

Preliminary Ruling of the Court of Justice of the European Union

According to the CJEU, the fact a third party also benefits as a result of expenditures incurred by a property developer in respect of advertising costs, administrative costs, and estate agent’s commission in connection with the sale of apartments is not sufficient to deny a full input VAT deduction for the expenditures. In determining the deductibility, the CJEU thinks the issues to consider are: first, whether or not there is a direct link between the expenditure and the taxable person’s economic activity, and second, whether or not the benefit to the third party is ancillary to the taxable person’s business purposes.

The CJEU also said that the fact that the specific expenditures that also benefited a third party were linked to a specific outgoing transaction and were not part of the taxable person’s general overhead costs is not relevant.

And finally, the CJEU said the fact that it is possible to recharge the costs to the third party could be an indication that these costs are related to the transaction carried out by the third party and thus a full input VAT deduction could not be claimed. However, this fact alone is also not decisive, according to the Court. The factual circumstances must be taken into account.

So, it is now up to the Belgian Court of Cassation, and potentially a court of appeal, for an assessment based on the factual circumstances in the Vos Aannemingen case.


As a result of the CJEU’s ruling, the Belgian VAT Authorities should not reject claims for a full input VAT deduction solely based on the fact that third parties also benefit from the expenditure. As a result, the factual circumstances will be crucial in determining the deductibility.

Brigitte Braeckmans

Charles-Ly Laurant