When a company transfers its business but retains the building from which that business is operated, an important VAT question arises: what happens to the input VAT deducted on the building if it is subsequently leased, VAT-exempt, to the purchaser of the business?
This is a common situation in practice and one that has regularly given rise to discussions with the Belgian VAT authorities. It has sometimes been argued that, where the commercial activity is transferred as a going concern within the meaning of Article 19 of the VAT Directive, the transferor should not be required to adjust the VAT previously deducted on the retained building.
In its judgment of 2 September 2026 in Case T-397/25, A&P Deco, which originated in Belgium, the General Court has now clearly rejected that approach.
The building follows its own VAT treatment
The General Court draws a clear distinction between the business assets that are transferred and the building that remains in the ownership of the transferor.
Although the transfer of the commercial activity may qualify as a transfer of a going concern, the building does not form part of that transfer. Its subsequent use must therefore be assessed separately for VAT purposes. If the building is made available to the purchaser under a VAT-exempt lease, the change in use may trigger an adjustment of the input VAT initially deducted for the remaining adjustment period.
The fact that the purchaser continues to operate the same business from the same premises does not alter this conclusion. VAT TOGC applies only to the assets that are actually transferred. It does not protect assets retained by the transferor from the ordinary VAT adjustment rules.
The outcome follows logically from the asset-by-asset operation of the VAT deduction and adjustment rules. The judgment nevertheless provides welcome clarity on an issue frequently arising in business transfers and reorganisations.
Practical implications
Where a business is transferred while the underlying real estate is retained, the potential VAT adjustment exposure should be quantified before the transaction is implemented. The analysis should cover both the VAT deducted upon the acquisition or construction of the building and the VAT relating to subsequent renovation or capital expenditure, taking account of the applicable adjustment periods.
Depending on the circumstances, possible alternatives may include:
- bringing the transferor and the purchaser within the same VAT group;
- using a VAT-taxable lease or another taxable right-of-use arrangement, where the applicable conditions and the economic substance permit this;
- including the building among the assets transferred as part of the transaction.
These alternatives should be assessed early, based on the property, the parties' VAT status and activities, and the building's intended use.
The next case to watch: Roenes
The pending Case T-851/25, Roenes, may have even more far-reaching consequences for real estate transactions, as it concerns a fundamental question: when can a rented building itself constitute a business for VAT purposes?
Unlike A&P Deco, where the building was retained by the transferor, Roenes concerns the sale of a residential apartment complex together with the existing leases. The General Court is being asked whether such a transaction can qualify as a transfer of a going concern.
The judgment should therefore provide further guidance on whether—and, if so, under what circumstances—a rented building can constitute a business for VAT purposes. This has long been a matter of debate in Belgium, and the answer could materially affect the VAT analysis and structuring of transactions involving let properties.
If you would like to discuss how these cases may affect an existing or contemplated transaction, please contact PwC Belgium or your usual PwC contact.
Authors:
- Lionel Wielemans, Director at PwC Belgium
