When you buy a plot of land and transform it into building land – it is not a ‘building land purchased for the purpose of resale’
(Ministre de l’Économie, des Finances et de la Relance, C-191/21, order of 10.02.2022)

According to Article 392 of the VAT Directive, the margin scheme applies in respect of ‘building land purchased for the purpose of resale’ (this is an option for the Member States to introduce this provision).

In this case, French companies acquired plots of land developed with buildings. They divided it so that building lands were detached from it. The sale of these detached plots was then taxed under the VAT margin scheme.

The tax authorities challenged this approach. The Court agreed with the tax authorities.

It considered that:

• This issue was already decided in the Icade Promotions judgment (30.09.2021, C-299/20);
• Article 392 refers to a building land purchased for resale. It is therefore necessary that the goods (land) purchased and sold are identical.
• In this case, built-up land was purchased and it became building land after its transformation. Therefore, it was not ‘building lands purchased for the purpose of resale’.
• However, if the transformation does not involve a change in the character of the land (e.g. mere subdivision of the 'building lands’), the VAT margin scheme applies to such plots.