General Court of the EU: contribution in kind to a company from a VAT perspective
In a recent judgment, the General Court of the EU considered the VAT treatment of a contribution in kind of real estate to a company whose sole shareholder is the contributor. If the contributor receives no actual consideration, the transaction does not constitute an ordinary supply of goods for consideration. Nevertheless, for VAT purposes, the transaction may still be treated as a supply of goods for consideration or fall within the regime for the transfer of a totality of assets or part thereof.
The case concerned an Austrian VAT payer who contributed developed land to a company of which he was the sole shareholder and corporate agent. He had previously leased the properties as part of taxable transactions and had claimed input VAT deduction upon their acquisition. He received no consideration for the contribution—the company neither issued new shares to him nor increased his ownership interest. The contributor reported the transaction as outside the scope of VAT, whereas the Austrian tax authorities treated it as a taxable supply of goods and assessed additional VAT.
In Case T-413/25 (Peckeger), the General Court first considered whether the transaction could fall within the regime for the transfer of a totality of assets or part thereof, which is comparable to the Czech regime for the transfer of a business establishment or part thereof and is not regarded as a supply of goods for VAT purposes. It confirmed that a Member State which has introduced this regime may not restrict its application beyond the conditions laid down in the VAT Directive. According to the General Court, the relevant provision of the Directive has direct effect and may therefore be relied on by a taxable person against the tax authorities.
The General Court further stated that a supply of goods for consideration presupposes a legal relationship involving reciprocal performance between the parties, with the consideration received being directly linked to the goods supplied. If the contributor receives no actual consideration, the transfer cannot be regarded as an ordinary supply of goods for consideration. However, the transfer need not remain outside the scope of VAT. If input VAT was deducted in full or in part upon acquisition of the assets, their transfer free of charge will be regarded as a supply of goods for consideration on the grounds that business assets are being used for purposes unrelated to the economic activity.
The judgment should not have a significant impact on Czech practice. The Czech VAT Act provides that a contribution in kind in the form of assets is, where the relevant conditions are met—in particular, where input VAT deduction has been claimed in respect of those assets—treated as a supply of goods or, as applicable, a supply of services for consideration. The situation considered by the General Court is therefore expressly regulated under Czech law.