Assignment of rights and obligations under a development agreement
On 24 June 2024, the Supreme Administrative Court (NSA) issued a judgment in a seven-judge panel regarding the VAT qualification of the assignment of rights and obligations under a development agreement (file reference I FSK 1661/20).
In the NSA’s view, the assignment of rights and obligations under a development contract for a consideration in the form of the so-called ‘compensation payment’, where the assignor does not have the right to dispose of the apartment as owner, constitutes, for VAT purposes, an activity qualified as a provision of services and not as a supply of goods.
– The NSA decided that in the case of an assignment effected before the developer has handed over the premises to the assignor (i.e. the assignor does not have the right to dispose of the premises, as it has not received the keys to the premises) and in the case of an assignment effected during the construction of the building, with the assignee having paid only the so-called ‘spacial payment’, there can be no question of disposal of the premises. In the case of an assignment made during the construction of a building, when the assignee pays only the so-called ‘compensation payment’, it is not possible to speak about the disposal of goods as owner within the meaning of Article 7(1) of the VAT Act, which in turn excludes the possibility to treat the transaction between the assignor and the assignee as a supply of goods for consideration, explains Natalia Zborowska of Thedy & Partners.
Consequently, in the case of such a transaction, the reduced VAT rate of 8% (applicable to the supply of residential premises) will not apply, but the basic VAT rate of 23%.