Case law: share deal on project company or project development services?

On 16 November 2021 the Court of Appeal of Antwerp decided that the VAT Administration could not consider the sale price of the shares of a project company established in the framework of a real estate project (not subject to VAT) to be disguised compensation for project development services (subject to VAT).

According to the Court the VAT Administration failed to prove that the share deal was simulated because, among other reasons, the parties had respected all legal consequences of the share deal and the various other agreements in relation to the real estate project and there was no proof that the shareholder had effectively carried out any project development services (other than mere preparatory activities which were remunerated to the shareholder). The mere fact that the price of the shares would be too high (quod non in the Court’s view) would also be no proof of simulation.

This specific case is an example of the wider attempts by the Tax Administration whereby the price for the shares is being treated as a price for project development services subject to VAT. Similar to the case of 12 February 2019 before the same court (be it on grounds of abuse instead of simulation), the judgement turned out in favor of the VAT taxpayer. 

This case law indicates that increased scrutiny remains required in case of share deals on real estate companies as to the legal structuring of the deal and any commercial justifications.