ECJ on sale-and-leaseback: new and interesting development in VAT


Last week the EU Court of Justice handed down a very interesting judgment regarding sale-and -leaseback transactions. The judgment radically impacts the way such and similar transactions are currently treated from a VAT perspective in Belgium.

Mydibel is a regular tax payer and the owner of several buildings in Belgium. Mydibel fully recovered  the VAT paid on the relating construction and renovation invoices. To increase its liquidity, Mydibel entered into sale-and-leaseback transactions with 2 financial institutions. These transactions were not subject to VAT.

With reference to the so-called VAT revision scheme, the Belgian Tax Administration argued that the initial VAT deduction by Mydibel on the buildings could not be maintained. 

The EU Court of Justice finds otherwise. On the consideration that – in the case at hand – the sale-and -leaseback transactions should be disregarded for VAT purposes, there was no ground for Mydibel to correct/revise the initial VAT deduction.

Thoughts and actions

  • The judgment is an additional step in the courts’ economic (over civil law) approach towards VAT.
  • The judgment radically impacts the sale-and-leaseback transactions are currently treated from a VAT perspective in Belgium.
  • The judgment may impact similar types of transactions.
  • Tax payers (and their counterparts) planning to enter into sale-and-leaseback transactions should carefully consider this judgment. It can create opportunities in terms of both VAT cost saving and VAT cash-flow saving.
  • Past sale-and-leaseback transactions which resulted in a VAT cash out should be re-assessed. The Mydibel case opens the door to claim back VAT that was repaid to the State.

If you have any questions regarding this topic, please reach out to Pascal Janssens or your regular PwC contact.