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Dear Readers,

This article is to inform you about a judgment of the Supreme Administrative Court (the “SAC”) in case 4 Afs 64/2023 – 44. In this judgment, the SAC considered VAT in a sale of non-built up pieces of land.

Under the current text of the VAT Act, supply of a non-built up land, which is not a building plot, is exempt from VAT (a supply without an entitlement to tax deduction). In addition to this, the VAT Act explicitly states what is meant to be a building plot. However, it is often rather difficult to tell a (non) built up piece of land in real life.

What Was the Above-mentioned Judgment About?

In selling pieces of land, a VAT payer applied VAT exemption, the conditions of which were considered met by that payer. The VAT payer supported their opinion by the absence of a subjective intention to erect a structure on the land and the absence of the needed construction action. The concerned pieces of land were located in a buildable area with the defined use involving a commercial and industrial zone, i.e. the land was intended to be built up on under the zoning plan.

The Regional Court (the “RC”) arrived at a conclusion in this particular case that the supply involved building plots because both conditions specified in the VAT Act had been met. In the RC’s view, the existence of a subjective intention to erect a particular structure is not the condition to classify the land as a building plot. The RC specified two conditions, under which, if and when met, land can be considered a building plot pursuant to Section 56 (2) (a) (1), i.e. a structure is to be erected on the particular piece of land and the land is or was subject to construction work or administrative acts for the purpose of erecting a structure fixed to the ground.

The SAC’s Statement

The Supreme Administrative Court agreed with the Regional Court’s decision and, as a result, both courts arrived at a conclusion that the supply involved building plots.

In this context, the SAC confirmed that contracting parties’ intention to erect a structure on the land rather than a subjective intention was the key aspect; however, general clues are sufficient. In this particular case, expert opinions on the land’s evaluation as well as the fact that the buyer applied VAT deduction were sufficient to meet the first condition (a structure is to be erected on the land). Moreover, the first condition’s fulfilment was supported by the fact that the payer requested the zoning plan documenting the land’s buildability prior to the sale. In the courts’ view, all circumstances indicated that a structure fixed to the ground was to be erected on the concerned pieces of land (even though unspecified), and that a supply of land intended to be built up was the subject matter of the reviewed supplies.

The SAC also confirmed that the zoning plan itself was also an administrative act for the purpose of erecting a structure (the second condition defining a building plot pursuant to the VAT Act).

If you have come across sale of land and are uncertain about VAT’s application, please feel free to contact us. We will be happy to help you.

Michaela Kozminská
kozminska@clarksonhyde.cz