Establishing an SPV Specifically to Develop a Real Estate Project Is Not Abusive

On 9 and 23 June 2017, the Antwerp Court of First Instance issued two decisions confirming that establishing an SPV should not per se be considered abusive. The tax authorities have appealed these decisions.

In the real estate sector, working with an SPV is a common practice and has multiple advantages, ranging from limited liability to allowing several developers to team up and providing a corporate framework for a joint venture. Apart from financial and legal benefits, an SPV can also have tax advantages. For instance, an SPV's shareholders may be able to realise a tax-exempt capital gain on their shares (provided certain conditions are met) as opposed to a taxable capital gain on the underlying asset(s). Furthermore, the transfer of shares in an SPV does not, in principle, trigger real estate transfer tax and should not result in VAT leakage.

In two recent decisions, the Antwerp Court of First Instance ruled that a transfer of shares in an SPV should be considered a stand-alone transaction which cannot be treated as a transfer of the underlying asset(s). In these decisions, the court ruled against the federal tax authorities, which had refused to acknowledge the existence of the SPV and had applied the anti-abuse provision found in the VAT Code.
The court (in keeping with established case law of the Court of Justice of the European Union) stated that establishing an SPV is not per se abusive, provided the related tax advantages do not constitute the (or a) principal aim of the transaction. In the case at hand, establishing an SPV was a pre-condition to participate in the tender.

These decisions are undoubtedly a set-back for the tax authorities. Application of the various anti-abuse provisions remains subject to a fact-based assessment, on a case-by-case basis. As mentioned above, the tax authorities have appealed these decisions.

As is the case in Belgium, working with an SPV in the Netherlands may result in advantageous corporate tax and VAT treatment. However, the Dutch tax authorities usually do not question the use of an SPV, despite the tax advantages this entails.