Scope of Individual Interpretation Application Received for Tax Deduction from Bailiff Auction Invoice
On June 27, 2023, the Irish Revenue received an application for an individual interpretation regarding the right to deduct input tax from an invoice issued by a bailiff. The application, dated June 26, 2023, was supplemented with additional information in a letter dated July 18, 2023, which was received by the Revenue on July 21, 2023.
The applicant, a limited liability company registered as an active VAT payer, intends to purchase four land properties through a future bailiff auction conducted by an authorized body. Each property will be described separately:
Property 1: This property, identified by plot number 1 in the Land and Mortgage Register, has an area of 0.3376 hectares and is categorized as “BI – Other Built-up Areas.” The owner of this property, according to the Land and Mortgage Register, is the Mayor of the City. Additionally, a company registered as an active VAT payer is also listed as an owner.
Property 2: Identified by plot number 2 in the Land and Mortgage Register, this property has an area of 0.2672 hectares and is also categorized as “BI – Other Built-up Areas.” The owner of this property is the Mayor of the City, while the Debtor is listed as the perpetual usufructuary and owner of a separate building on the property—a five-story office building constructed in 1976.
Property 3: This property, identified by plot number 3 in the Land and Mortgage Register, has an area of 0.4629 hectares and is categorized as “Ba – Tereny Przemysłowe” (Industrial Areas). The owner of this property is the Mayor of the City, with the Debtor listed as the perpetual usufructuary. Property 3 is undeveloped and mainly consists of asphalted or concreted surfaces, serving as an internal road or parking lot.
Property 4: Identified by plot number 4 in the Land and Mortgage Register, this property has an area of 0.0643 hectares and is categorized as “BI – Other Built-up Areas.” The owner of this property is the Mayor of the City, and the Debtor is listed as the perpetual usufructuary. According to an appraisal report prepared for the auction, Property 4 is undeveloped.
All of the aforementioned properties are located in an area where the local spatial development plan is not in force. According to the Study of Conditions for Spatial Development Directions, approved by the City Council on October 10, 2006, the properties are situated in an area marked as PU.20, designated for production and service activities with a maximum building height of 20 meters and a development intensity index of 1.5.
Furthermore, on January 28, 2013, the President issued a decision regarding the development conditions for the investment consisting of the reconstruction and change of use of existing warehouse and office buildings into an exhibition center with office buildings and possible construction of a technical building and above-ground car parks. This decision applies to several plots, including those belonging to the property under valuation.
According to the appraisal report, the valued plots form an organized economic entity, and therefore, they were collectively valued. Selling them separately would be impractical due to unfavorable shape, small area, and limited development possibilities. Consequently, the term “Property” used in the application refers to all the properties collectively.
The applicant does not possess detailed information regarding the Debtor’s use of the Real Property, particularly whether it is used for activities exempt from value-added tax or if the Debtor has the right to reduce the tax amount by the input tax on the purchase of the Real Estate.
Information on the planned bailiff’s auction indicates that the sale of the Real Estate, including ownership and perpetual usufruct rights, will be subject to VAT at a rate of 23% and will not be exempt from VAT. The bailiff made the decision to tax the sale based on a written statement from the Debtor.
In a sale transaction through a bailiff auction, as per Article 106c of the VAT Act, the court bailiff issues an invoice documenting the delivery of the property, which will display the relevant VAT. However, this invoice will be issued in the name and on behalf of the Debtor.
If the applicant successfully purchases the real estate through the bailiff auction, they will be used for taxable activities. The application also includes additional details and specifications regarding the future event.
Taxation of real estate sale transactions by the bailiff will not be subject to individual interpretation, as clarified by the Irish Revenue. The Revenue will assess the application based on the provided information and relevant tax regulations.
In conclusion, the applicant seeks clarification on the right to deduct input tax from an invoice issued by a bailiff for the purchase of real estate through an auction. The Irish Revenue will review the application and provide a response based on the specific circumstances and applicable tax laws.