Unraveling ECJ Case C-468/93 (Gemeente Emmen): Decoding the Essence of “Building Land

"ECJ Ruling in Gemeente Emmen Case Sets Precedent for Tax Provisions and Harmonization of Laws"

On March 28, 1996, the European Court of Justice (ECJ) issued a decision in the case C-468/93 (Gemeente Emmen), which pertained to tax provisions and the harmonization of laws related to turnover tax. Specifically, the case addressed the exemption for the supply of land that has not been built on other than building land. The interpretation of the term “building land” was to be defined by the Member States in accordance with the EU VAT Directive.

Article 12 of the EU VAT Directive states that Member States have the authority to regard as a taxable person anyone who carries out a transaction relating to the supply of a building or parts of a building and the land on which the building stands, or the supply of building land. The definition of “building” in this context refers to any structure fixed to or in the ground. Member States are allowed to establish detailed rules for applying the criterion of first occupation to conversions of buildings and determine what is meant by “the land on which a building stands.” Additionally, Member States may apply criteria other than first occupation, such as the period between completion and first supply or the period between first occupation and subsequent supply, as long as these periods do not exceed five years and two years, respectively.

For the purposes of Article 12(b), “building land” is defined as any unimproved or improved land as determined by the Member States. Article 135(1)(k) exempts the supply of land that has not been built on, other than building land as referred to in Article 12(1)(b).

In the absence of a legislative definition of “building land,” the Hoge Raad (Supreme Court of the Netherlands) had previously held that turnover tax was not due for the supply of land that had not been built on but was intended for building, except in cases where the land was improved. However, the Hoge Raad’s interpretation was narrower than that of the Netherlands tax authorities, who considered land that had not been built on as improved if work had been carried out in its surroundings with the intention of development.

In June 1992, the municipality of Emmen supplied eight sites earmarked for housing, which had not been built on but were equipped with roads, sewers, and connections to utilities. The municipality paid turnover tax but appealed against the assessment, arguing that the work carried out did not transform the land into immovables within the meaning of the relevant legislation. The Belastingdienst (Dutch tax authorities) contested this interpretation, claiming that the plots constituted transformed immovables. The case was brought before the Gerechtshof te Leeuwarden, which sought clarification on the interpretation of the term “transformed property” in the context of building land.

The national court referred two questions to the ECJ for a preliminary ruling. The first question asked whether the term “improved land” in Article 4(3)(b) of the directive should be understood as land where the soil itself has been prepared and/or measures have been taken exclusively for the land itself, or if it also includes land that falls under a zoning plan and has undergone infrastructure measures. The second question asked whether both conditions of the first question needed to be satisfied for land to be considered improved.

The ECJ’s decision in this case would have significant implications for the interpretation and application of VAT regulations related to the supply of land. The court’s ruling would provide clarity on the definition of building land and the criteria for determining whether land is considered improved or unimproved.

In conclusion, the ECJ’s decision in the case C-468/93 (Gemeente Emmen) addressed the interpretation of the term “building land” in relation to VAT regulations. The court’s ruling would have implications for the taxation of land that has not been built on and the criteria for determining whether land is considered improved or unimproved. The case highlighted the need for a clear definition of building land and the importance of harmonizing VAT laws across Member States.

Barry Caldwell

Barry Caldwell

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