VAT: European Commission asks France to change its legislation on building land
The Commission has asked France to amend, within two months, its legislation granting exemption from VAT on the supply of building land effected for consideration by a taxable person, where the land is acquired by natural persons intending to build on it. This request takes the form of a reasoned opinion (second stage of the infringement procedure provided for in Article 226 of the EC Treaty). If France does not amend its legislation and practice within the time limit laid down, the Commission may decide to refer the matter to the Court of Justice.
The VAT Directive lists the transactions that are exempt from VAT. These are exceptions to the general principle whereby any supply of goods or services effected for consideration by a taxable person is subject to VAT.
The list includes certain building operations. However, Article 135(1)(k) of the Directive states explicitly that building land may not be exempted from VAT.
In spite of this, France exempts from VAT the supply of building land effected for consideration by a taxable person where the land is acquired by natural persons in order to construct buildings intended for residential use. This provision is clearly contrary to the VAT Directive.
The Commission's case reference number is 2007/2386.
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