Facts
A&P Deco operated a garden centre in buildings it owned and had deducted the VAT on the construction and subsequent investments.
A&P Deco operated a garden centre in buildings it owned and had deducted the VAT on the construction and subsequent investments.
In 2013, the business was transferred to WR Woestijnroos under Article 11 of the Belgian VAT Code (i.e. a VAT-neutral transfer of a branch of activity or part of a totality of assets). The building itself was not included in the transfer. A&P Deco retained ownership and, from the same date, leased it to the transferee exempt from VAT.
WR Woestijnroos continued the taxable activity without interruption in the same building.
The Belgian tax authorities nevertheless found that the use of the building had changed in the hands of A&P Deco and adjusted part of the VAT originally deducted.
Change in use in the hands of the transferor
The General Court upheld that adjustment.
Before the transfer, A&P Deco used the building as a capital good for its own taxable activity. After the transfer, the same building was used for an exempt lease of immovable property.
In practical terms, very little changed. The garden centre remained active at the same location. For VAT purposes, however, the General Court considered that there was a clear change in use in the hands of A&P Deco: from use for taxable transactions to use for an exempt activity.
The fact that the transferee continued to use the building for transactions carrying a full right to deduct does not change this. The adjustment must be assessed at the level of the taxable person that exercised the original deduction.
The General Court also points out that the adjustment burden cannot be shifted to the tenant. Otherwise, the tenant would bear a VAT liability arising from an investment and an earlier deduction made by another taxable person.
Article 11 does not automatically bring the building within the transfer
This does not mean that Article 11 of the Belgian VAT Code cannot apply where the business premises remain outside the transfer.
A transfer of a totality of assets or a branch of activity may also take place without transferring ownership of the building. The decisive question is whether the assets transferred as a whole enable the transferee to continue the economic activity independently.
Even where specific business premises are essential, that condition may be met if the building is made available under a lease agreement.
In other words, the lease may be necessary to allow the activities to continue as a going concern, without the lease itself forming part of the totality of assets or branch of activity being transferred.
That is the key point in this case.
In an Article 11 transaction, the focus is usually on whether the transferred assets together constitute a totality of assets or a branch of activity. However, the VAT position of assets that remain outside the transaction must be considered separately.
Article 11 of the Belgian VAT Code therefore does not automatically neutralise the adjustment consequences for a capital good that remains with the transferor and subsequently acquires a different VAT use.
New lease right versus existing right
The General Court makes an interesting distinction in this respect.
An existing lease right can, as an intangible asset, form part of a totality of assets. For example, a business that is itself a tenant may transfer its existing lease position together with the other assets.
That was not the case for A&P Deco. A&P Deco owned the building. No existing lease right was therefore transferred out of its assets as part of the transaction. Instead, the new commercial lease created, at that point, a new, personal and temporary right of use for the transferee.
According to the General Court, that newly created lease right does not form part of the totality of assets to which the continuity fiction under Article 11 of the Belgian VAT Code applies.
Accordingly, when determining whether a lease right itself forms part of the transfer, it is relevant whether an existing right is transferred or a new right is created in connection with the transaction.
The building itself, meanwhile, remains a capital good of A&P Deco. Its subsequent use for exempt leasing and any resulting adjustment must therefore be assessed in the hands of A&P Deco.
Practical implications
The outcome is not revolutionary when compared with existing Belgian practice. It follows the position of the tax authorities, and Belgian case law had already accepted that a transfer under Article 11 of the Belgian VAT Code does not automatically prevent an adjustment arising for real estate that remains outside the transfer and is subsequently leased exempt from VAT.
A&P Deco now confirms that approach at EU law level and, in particular, clarifies the position of the newly created lease right.
It is nevertheless somewhat striking that, in Schriever, the Court had held that leased elements can be taken into account in determining whether there is a transfer of a totality of assets, or part thereof. If that is the case, it would not be illogical to extend that approach to the adjustment rules as well.
For practitioners, the key point is that the VAT analysis of a transfer or reorganisation does not end with the qualification as a totality of assets or a branch of activity.
A building may have been used for fully taxable activities for many years and then, for example as part of a carve-out, an intragroup transfer or the sale of a business activity, be put to a different use. If an adjustment period is still running, the historical deduction may once again become relevant.
Renovation and improvement works also require attention. Depending on their nature, different adjustment periods may apply and certain investments may, for VAT purposes, have become part of the immovable property, while other assets may be included in the transfer.
Economic continuity and VAT continuity therefore do not necessarily coincide.
Structuring can make a difference
An adjustment will not necessarily produce the same result in every structure either.
Since 2019, it has been possible, subject to conditions, to opt for VAT taxation of leases of immovable property. Where the option is available and validly exercised, the continued use of the building may preserve the right to deduct.
The option is not available for every building. For the ordinary optional leasing regime, VAT on the works contributing to the construction of the building must, in principle, have become chargeable no earlier than 1 October 2018. The relevant investments are also subject to specific adjustment rules. For, among other things, the construction or acquisition of a building leased under the optional regime, an adjustment period of twenty-five years may apply.
For A&P Deco itself, with buildings dating from 2004-2005 and works carried out up to 2011, that regime was of course not available.
A VAT group may also be relevant in an intragroup context. Where the property company and the operating company are members of the same Belgian VAT group, transactions between them are in principle treated as internal transactions and fall outside the scope of VAT. The right to deduct is then assessed at the level of the VAT group, taking into account its external activities.
This is of course a different context from A&P Deco, where the business was transferred to a third party. Potential adjustments must also be considered separately when a VAT group is formed, when an entity joins a VAT group or when it leaves one.
In any event, the remaining duration of an adjustment period can be a material factor in the structuring and pricing of a transaction.
Rights in rem: separate analysis
Finally, A&P Deco should not simply be extended to the creation or transfer of rights in rem.
The case concerns a newly created personal lease right.
The VAT analysis is different for rights such as emphyteusis, a right of superficies or usufruct. Such rights in rem have their own qualification under Belgian VAT law and must be assessed separately, both as regards their transfer or creation and their potential impact on the adjustment rules.
Conclusion
A&P Deco confirms that applying Article 11 of the Belgian VAT Code to the transfer of a business or branch of activity does not automatically neutralise the VAT position of real estate that remains with the transferor.
This is not a change of direction in existing Belgian VAT practice. The judgment does, however, clarify how the going concern rules and the adjustment rules interact where the business premises are not transferred but are subsequently leased exempt from VAT.
The ultimate VAT impact depends on what exactly forms part of the totality of assets or branch of activity, which investments remain with the transferor and how they are used after the transaction.
Are you planning a transfer or reorganisation involving real estate? We would be happy to discuss the potential VAT impact and the available structuring options.
Source: General Court of the European Union, 2 September 2026, A&P Deco NV, T-397/25.