A rented building may change hands without VAT, but continuity brings history, duties and cash consequences.
The completion statement is almost ready. The seller expects the property transfer to proceed without VAT. The buyer sees tenants, signed leases and rent arriving each month. On paper, the activity appears to continue without interruption.
Then someone asks what comes with the keys. Is it only the building and its leases? Or is the buyer taking over a functioning rental activity, including its administration, agreements and VAT history?
That distinction can decide whether Article 37d of the Dutch VAT Act applies. My first tax-file question would be precise: what, exactly, is the buyer continuing on the morning after completion?
The answer affects more than the invoice. It can change the cash required at completion, the responsibilities inherited by the buyer and the value of records created years before the sale.
A building with tenants is not the whole answer
The Dutch Supreme Court has placed this boundary before the Court of Justice of the European Union. The case concerns a developer that converted an office building into 77 residential apartments. The apartments were rented from 1 August 2017 and sold to an investment company in November that year. The buyer continued the rental activity.
In its reference of 21 November 2025, ECLI:NL:HR:2025:1732, the Supreme Court asked whether a property used solely for VAT-exempt residential letting can qualify as a transferred business activity. It also asked whether the developer’s intention matters, including whether temporary letting formed part of a planned sale.
The European reference, listed as T-851/25, Roenes, remains pending. The practical issue is whether the transaction transfers an autonomous economic activity rather than an asset that happens to have tenants.
That distinction is demanding because both descriptions may look credible. A rent roll suggests continuity. A development plan aimed at sale suggests something different. The commercial history must explain which activity truly existed and what the buyer actually acquired.
Continuity carries a tax history
Article 37d says that no supply of goods or services is deemed to take place when all or part of a generality of goods is transferred. The buyer then takes the seller’s place for relevant VAT purposes. The rule can apply to a sale, a transfer without payment or a contribution to a company.
I read this as a continuity rule, not a convenient invoice choice. When the transaction qualifies, the buyer does not begin with a clean VAT slate. Relevant rights and obligations can travel with the activity, including adjustment rules and, where applicable, an existing option for taxed letting.
For real estate, the VAT adjustment period can run for ten years. That makes the historic use of the property commercially important. Earlier input VAT deductions, changes between taxed and exempt use, and the timing of construction or first use may continue to matter after ownership changes.
Consider a small investor buying a rented mixed-use building. The shop is let under a taxed arrangement, while the apartments are exempt residential rentals. The price and financing may be agreed before anyone reconstructs the VAT history. If Article 37d applies, incomplete records do not become harmless because no VAT appears on the completion statement. The uncertainty has simply moved into the buyer’s administration.
The chronology must tell one story
The Belastingdienst describes the operational threshold clearly. The transferred package must be an enterprise or an independent part of one, and the buyer must continue it or intend to continue it. A collection of loose assets will usually not be enough.
For a rental activity, the useful evidence is practical. It may include leases, tenant deposits, rent collection, service contracts, management arrangements, maintenance responsibilities and the systems used to administer the property. The buyer’s plans also matter because continuity cannot exist only in the seller’s wording.
Dates deserve equal attention. When did development finish? When did letting start? When was the property marketed? When did buyer negotiations begin? What did the seller’s board or management decide at each stage?
Temporary letting can be genuine business activity. It can also sit inside a development-and-sale process. The pending European case matters because it may clarify how those two realities should be separated when residential letting is exempt from VAT.
This is where governance enters the tax file. The purchase agreement, completion statement, warranties and handover records should describe the same transaction. If one document says operating rental business while another presents a newly developed asset prepared for sale, the tax position begins with an internal contradiction.
Cash today, responsibility tomorrow
A VAT classification can create an immediate funding issue. If VAT is charged, the buyer may need to finance that amount even when recovery is expected later. Recovery may also be limited where the property supports exempt residential letting.
When Article 37d applies, the absence of VAT at completion can ease the immediate cash burden. Yet the buyer may inherit an adjustment position that affects later returns. That exposure belongs in the price discussion, the warranties and the information handover, not in a box left for the bookkeeper after completion.
The same discipline matters in smaller transactions and family-company restructurings. Moving a rented property between related companies does not remove the need to identify what is being transferred. Nor does calling the transaction a business transfer settle the question.
Returning to that completion table, I would want more than an agreed VAT sentence. I would want a dated account of the activity, a clear property-use history and records that allow the buyer to understand any continuing adjustment period.
The tenants may stay, the rent may continue and the building may look unchanged. Tax continuity asks something deeper. It asks whether the business crossed the table with the bricks, and whether both parties can still explain that answer years later.
If a property transaction may include a continuing rental business, review the VAT history and transfer documentation before completion.
The data, sourcing, and analysis behind this article were conducted by Linda Pavan Geraedts. AI was not used to identify sources, build the factual basis, or produce the analytical judgment contained here. AI was used only as a drafting aid. The final English text was personally reviewed, edited, and approved by Linda Pavan Geraedts before publication.
References
- EU Gerecht verduidelijkt btw-gevolgen bedrijfsoverdracht
- Hoge Raad / Rechtspraak - Pending EU clarification on short-term rental before sale by a property developer
- Rechtspraak - Status of the Dutch preliminary reference
- Wettenbank - Dutch statutory rule for transfer of a business or autonomous business part
- Belastingdienst - Operational Dutch VAT consequences of a business transfer
- Hoge Raad / Rechtspraak - Fact-sensitive test for an autonomous activity rather than a loose asset sale
- Rechtspraak - Nieuwsbrief Rechtspraak Europa HvJ 8-9
