General Court clarifies non-taxability in asset transfers
The Gericht der Europäischen Union (General Court of the European Union) commented on the VAT treatment of a contribution of developed real estate in its judgment of 2 September 2026 in Case T-413/25, Peckeger. The central issue was whether a Member State may restrict the non-taxability of a transfer of all or part of a business to certain cases of contribution.
The proceedings were based on a request for a preliminary ruling from the österreichischer Verwaltungsgerichtshof (Austrian Supreme Administrative Court) of 28 May 2025, which was received by the Court on 10 June 2025. At national level, the request is recorded as VwGH 28.5.2025, EU 2025/0002 (Ro 2024/13/0020), published in ÖStZ 2025/411. The parties to the main proceedings were F R and Finanzamt Österreich. The Court gave its decision in the Fifth Chamber in an extended composition of five judges.
Background to the main proceedings in Austria
Contribution of leased real estate to a GmbH
The underlying dispute concerned a natural person who operated a sole proprietorship. The business assets included several leased properties. The leasing of these properties was subject to VAT and entitled the taxpayer to deduct input VAT.
In 2007, the sole proprietor contributed the developed properties to an existing Gesellschaft mit beschränkter Haftung (GmbH, limited liability company) on the basis of a contribution-in-kind and contribution agreement. He was its sole shareholder and managing director. No additional shares in the company were granted to him for the contribution.
The GmbH continued to lease the properties after the contribution. The use of the properties therefore remained continuously directed, both before and after the transfer, toward taxable leasing transactions for VAT purposes.
Dispute over the VAT treatment
The contribution agreement referred to the provisions of Austrian reorganisation tax law. The objective was to treat the contribution as a non-taxable transaction for VAT purposes. In this context, § 22 Abs. 3 UmgrStG (Austrian Reorganisation Tax Act) was particularly relevant. Under that provision, contributions pursuant to § 12 UmgrStG are not deemed to be taxable transactions; in addition, in the field of VAT, the acquiring corporation directly assumes the legal position of the contributor.
However, Finanzamt Österreich (Austrian Tax Office) did not recognise the non-taxability. It justified this on the ground that there were no qualifying assets within the meaning of Austrian reorganisation tax law. In its view, the activity involved asset management with income from leasing and letting, not a commercial activity. In addition, the tax administration classified the transaction as an exchange for the granting of shares and made an adjustment of input VAT.
F R lodged an appeal against the assessment with the competent Finanzgericht (Tax Court). That court upheld the appeal only as regards the amount. The proceedings then reached the österreichischer Verwaltungsgerichtshof following an appeal on points of law by F R. The Verwaltungsgerichtshof stayed the proceedings and referred questions to the Court on the interpretation of the VAT Directive. Following the Court’s judgment, the Verwaltungsgerichtshof must conclude the main proceedings.
Relevant EU-law framework
Art. 19 MwStSystRL as the basis for no supply being deemed to have taken place
Art. 19 der Mehrwertsteuersystemrichtlinie (MwStSystRL, VAT Directive) permits Member States to treat the transfer of all or part of a business as if no supply of goods had taken place. This may occur for consideration, free of charge, or by way of contribution to a company. The recipient of the transfer may be treated as the successor to the transferor.
The Court emphasised that a Member State which makes use of this option must, in principle, apply the principle that no supply is deemed to have taken place to every transfer of all or part of a business. A restriction to certain categories of cases is permissible only to the extent that it is covered by Art. 19 Abs. 2 MwStSystRL.
Under that provision, Member States may take measures to:
- prevent distortions of competition,
- prevent tax evasion,
- prevent tax avoidance through the application of Art. 19 MwStSystRL.
According to the decision, these grounds are exhaustive. A limitation of non-taxability solely according to whether the transferred assets serve to generate specific categories of income under national law is therefore not automatically permissible.
Austrian restriction to certain categories of income
Under the Austrian law relevant in the main proceedings, assets eligible for contribution within the meaning of reorganisation tax law included, in particular, businesses and branches of activity serving to generate certain types of income. Covered income included income from agriculture and forestry, from self-employment, or from commercial business operations. Business assets that, under national income tax law, generated income from leasing and letting were not included.
The Court considered this to be a restriction problematic under EU law. Art. 19 MwStSystRL uses autonomous concepts of EU law. The scope of application may therefore not be narrowed on the basis of national income tax categories unless there is justification under Art. 19 Abs. 2 MwStSystRL.
Decision on the questions referred
No restriction to certain contribution cases
The Court answered the Verwaltungsgerichtshof’s third question first. It held that Art. 19 MwStSystRL precludes national legislation that restricts the principle that no supply is deemed to have taken place, in the case of the transfer of all or part of a business to a taxable person, to certain business assets or branches of activity serving to generate specific categories of income.
However, this applies subject to the proviso that the relevant restriction is not justified by one of the grounds set out in Art. 19 Abs. 2 MwStSystRL. It is for the national court to assess the specific circumstances of the main proceedings in this regard.
The Court based its interpretation in particular on the purpose of the VAT Directive. The taxable amount for VAT is to be determined uniformly throughout the European Union. The principle that no supply is deemed to have taken place must therefore be understood as an autonomous concept of EU law. Differing application according to national income tax distinctions would run counter to that objective.
Direct effect of Art. 19 Abs. 1 MwStSystRL
The Court further held that Art. 19 Abs. 1 MwStSystRL may have direct effect. A taxable person may rely, before a national court and against the competent tax authority, on the principle that no supply is deemed to have taken place if the national legislature introduced that principle before the Member State acceded to the European Union but restricted its scope to certain cases that are not covered by Art. 19 Abs. 2 MwStSystRL.
For this purpose, the Court referred to the general requirements for the direct effect of provisions of directives. A provision must be unconditional in substance and sufficiently precise. In the Court’s view, Art. 19 Abs. 1 MwStSystRL sets out with sufficient clarity the conditions under which a transfer is not regarded as a supply of goods for VAT purposes.
Direct effect is, however, precluded if the national court concludes that the specific restriction is justified by Art. 19 Abs. 2 MwStSystRL. That assessment remains a matter for the referring court.
No supply for consideration without additional shares
With regard to the first question referred, the Court held that the contribution of the developed properties is not to be classified as a supply of goods for consideration within the meaning of Art. 2 Abs. 1 Buchst. a MwStSystRL.
A supply for consideration requires a legal relationship between the supplier and the recipient in the context of which reciprocal performance is exchanged. The remuneration received must constitute the actual consideration for the goods supplied.
In the main proceedings, no additional shares in the company were granted to the contributor for the transfer. Subject to review by the national court, there was therefore no actual consideration. Under these circumstances, the contribution of developed properties to a company of which the contributor is the sole shareholder does not constitute a supply of goods for consideration.
Treatment as a deemed supply for no consideration
The second question referred concerned Art. 16 Abs. 1 MwStSystRL. Under that provision, the application by a taxable person of goods forming part of his business assets is treated as a supply for consideration where it is for private use, for the use of staff, as a disposal free of charge, or more generally for purposes other than those of the business, and where the VAT on those goods or their component parts was wholly or partly deductible.
The Court held that, in the main proceedings, the contribution of the developed properties constitutes the application of goods treated as a supply for consideration, in the form of a disposal free of charge or, more generally, for purposes other than those of the business. The properties had previously given rise to a right to deduct input VAT. In addition, the contribution was made without the granting of additional shares.
The Court clarified in this respect that, when examining the deemed supply without consideration, the focus must be on the transferor’s business. The continued taxable leasing by the receiving GmbH does not alter the fact that the goods left the contributor’s business.
Significance for the classification of transfers of a going concern
Autonomous concepts of EU law are decisive
The decision makes clear that Art. 19 MwStSystRL may not be narrowed by reference to national income tax categories. The concept of the transfer of all or part of a business must be interpreted independently under EU law. The decisive factors are the regulatory context and the purpose of the provision.
That purpose is to simplify, for VAT purposes, the transfer of businesses or parts of businesses. At the same time, it is intended to avoid the purchaser’s funds being burdened by tax which, if the requirements are met, the purchaser could later offset through input VAT deduction.
The Court also emphasised that Art. 19 MwStSystRL is not to be understood as a tax exemption that must be interpreted narrowly. Rather, the principle that no supply is deemed to have taken place applies only under certain conditions and is accompanied by the purchaser’s succession to the VAT position of the transferor.
Distinction from the German legal position
For Germany, Art. 19 MwStSystRL has been implemented in § 1 Abs. 1a UStG (German VAT Act). The German provision on the transfer of a going concern is not restricted to certain types of assets under income tax law. Leased real estate has long been capable, in various structures, of being the subject of a transfer of a going concern, provided the respective requirements are met.
Direct consequences of the Austrian restriction for the German legal position are therefore to be expected only to a limited extent. Nevertheless, the decision is significant for doctrinal classification. It confirms that EU-law standards are decisive for the transfer of a going concern. National concepts may not restrict the scope of application in a way that Art. 19 MwStSystRL does not provide for.
This also concerns the distinction from income tax categories. A concept used in VAT law, such as a separately managed business, is not automatically equivalent to a branch of activity for income tax purposes.
Classification of the contribution made without consideration
No consideration where no shares are granted
The decision is of particular importance for structures in which assets are contributed to a company without additional shares in the company being granted to the contributor. The Court distinguished this scenario from cases in which the amount of consideration or the direct link between the supply and the consideration is in dispute.
According to the Court’s description, there was plainly no actual consideration for the transfer in the main proceedings. The contribution therefore could not be treated as a supply of goods for consideration.
Relevance of Art. 16 MwStSystRL
The absence of consideration did not, however, mean that the transaction was irrelevant for VAT purposes. To the extent that no treatment as a non-supply under Art. 19 MwStSystRL applies, Art. 16 Abs. 1 MwStSystRL may come into play. Under that provision, the transfer without consideration of an item subject to input VAT out of the business may be treated as an application of goods deemed to be a supply for consideration.
For the Court, two requirements were decisive in the main proceedings:
- The transfer was made without additional shares and therefore without consideration.
- The contributed properties had previously given rise to a right to deduct input VAT.
Under these circumstances, according to the decision, there was a disposal free of charge or, in any event, an application for purposes other than those of the business within the meaning of Art. 16 Abs. 1 MwStSystRL.
Proceedings and further classification
The applicant was represented before the Court by a tax advisory firm, which publicly stated that its legal position had prevailed in full. However, the subject matter of the decision was solely the answering of the questions referred by the österreichischer Verwaltungsgerichtshof. The national court will decide on the final application to the main proceedings.
On the same day, 2 September 2026, the Court also delivered a further judgment on transaction structures in Case A&P Deco (T-397/25), which concerned an asset deal followed by leasing.7/25, A&P Deco. This concerned an asset deal followed by subsequent leasing. By contrast, the Peckeger decision discussed here concerns the contribution of developed properties to a GmbH without the granting of additional shares in the company.
Conclusion for companies, investors and high-net-worth individuals
The judgment makes clear that Member States may not narrow the principle that no supply is deemed to have taken place in the transfer of all or part of a business to certain contribution cases on the basis of national income tax criteria, unless there is justification under Art. 19 Abs. 2 MwStSystRL. At the same time, the decision shows that a contribution without consideration and without the granting of shares may, outside a non-taxable transfer, be treated as an application of goods deemed to be a supply.
In restructurings, real estate transactions and contributions to companies, the VAT classification can therefore be of considerable importance. MTR Legal Rechtsanwälte advises companies, investors and high-net-worth individuals on tax-law issues in connection with transactions and restructurings. Further information can be found at Legal advice in tax law.
