Publish Date

Nov 07, 2022

Dutch Supreme Court Provides VAT Guidance for Property Transformations

Special Tax Alert

On 4 November 2022, the Dutch Supreme Court issued a decision that includes guidance to determine when real estate reconstruction and transformation projects lead to the creation of ‘in effect newly built real estate’ for Dutch VAT purposes (in wezen nieuwbouw). This is relevant as the supply of newly built real estate is subject to 21% Dutch VAT and eligible for an exemption from Dutch real estate transfer tax (RETT). If there is no creation of newly built real estate, then the supply would typically be exempt from Dutch VAT and subject to Dutch RETT (at 8% for investors).


In its decision, the Dutch Supreme Court first highlights that a reconstruction effectively needs to lead to the development of a new building before it can qualify as newly built real estate for Dutch VAT purposes. This illustrates that reconstructions and transformations do not easily lead to the creation of newly built real estate from a VAT perspective.

The Supreme Court subsequently clarifies that the assessment needs to based on the level of construction adjustments to the existing structure of the building (including replacement thereof). Only such adjustments to the structure can lead to the creation of newly built real estate for VAT purposes. Other factors such as changes to the appearance or function of the building, the size of the investment or fair value impact should only be considered supportive elements at best. These other factors are not decisive to determine whether a reconstructed building qualifies as newly built real estate.


With this decision the Dutch Supreme Court sets a high bar before a reconstruction or transformation project can lead to the creation of newly built real estate. This is a positive development for transformations to residential buildings (as VAT is typically non-recoverable and would lead to a higher cost than Dutch RETT) and less positive for transformations to commercial buildings (which typically do qualify for VAT recovery, meaning RETT would be an absolute cost).

Despite the additional guidance, discussions with the Dutch tax authorities will likely still arise given the factual nature of the assessment.

As the VAT and RETT treatment of a project can have a significant impact on its commercial feasibility, we recommend to timely assess the relevant treatment and to obtain advance certainty when possible.

If you would like to receive more information or discuss the impact, please feel free to get in touch with your usual A&M adviser, Roel de Vries or Nick Crama.