Paying VAT when selling a building plot as a private individual.

Private individual or VAT entrepreneur

When you sell a building plot as a private individual, you are generally not liable for VAT. However, this may differ if the sale is conducted not in the capacity of a private individual, but as a VAT entrepreneur.

Exploitation of an asset

The law states that you are considered a VAT entrepreneur if you independently conduct a business or profession. Additionally, the exploitation of an asset to achieve sustainable income also constitutes VAT entrepreneurship.

Not a VAT entrepreneur for incidental activity

When an activity occurs only occasionally, it does not constitute VAT entrepreneurship. Similarly, if the sale merely involves the exercise of ownership rights – essentially the normal management of private assets – this will not result in VAT entrepreneurship. In these cases, the sale is conducted in the capacity of a private individual, and no VAT is due.

VAT entrepreneurship occurs when active steps are taken.

However, if a private individual takes additional steps to facilitate a (better) sale, this may result in VAT entrepreneurship. In VAT terms, this is described as taking active steps by deploying resources similar to those used by a manufacturer, trader, or service provider.

Previous agreement with obligations

A private individual who sold two building plots also encountered this issue. This individual had entered into a previous agreement with the municipality for the development of four building plots for residential properties. The agreement imposed various obligations on the private individual, such as elaborating a building program, drafting a subdivision plan, and preparing the site for construction and habitation.

The judge ruled that by undertaking these obligations, the private individual had taken active steps similar to those of a manufacturer, trader, or service provider. Consequently, the building plots were deemed to have been delivered as a VAT entrepreneur and were therefore subject to VAT.

Note! The seller argued that she intended to transfer the obligations to the buyers of the building plots and that she had not yet performed any work. However, this argument did not assist her case. The judge ruled that the municipality could enforce the obligations against her. By doing so, she had assumed a risk that is not comparable to the risk typically accepted in managing private assets.

Consultation

Whether the sale of a building plot occurs as a private individual or as a VAT entrepreneur depends on the facts and circumstances, and is a complex assessment. To prevent unexpected VAT implications, we recommend discussing your specific situation with one of our advisors.