NSA: important guidelines on VAT when selling real estate

Real estate sales are an area that still raises numerous tax uncertainties. A key issue is the possibility of waiving VAT exemptions – and as the Supreme Administrative Court has just reminded us, the condition for effective waiver is to adhere to the appropriate sequence of actions . A mere declaration by the parties is not sufficient – a formal declaration submitted before delivery or advance payment is crucial.

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VAT exemption – when is it applicable?

Pursuant to Article 43 paragraph 1 point 10 of the VAT Act, the supply of buildings, structures or parts thereof is exempt from VAT unless:

• as part of the first settlement,

• before the first settlement,

• or if less than 2 years have passed since the first occupation.

However, taxpayers may opt out of this exemption provided they meet two important criteria:

1. Both parties to the transaction must be active VAT payers,

2. They must submit a consistent declaration of taxation choice before the delivery date . This may be:

   • declaration submitted to the head of the tax office,

   • or contained in a notarial deed.

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Error: advance payment before declaration

In the case reviewed by the Supreme Administrative Court, the company entered into a preliminary real estate sales agreement (perpetual usufruct + buildings). The parties – both registered as active VAT payers – agreed that the transaction would be subject to VAT. Unfortunately, before the required declaration was submitted, the company paid an advance payment.

The company concluded that since the parties intended to tax the transaction, it was possible to deduct the VAT from the advance payment invoice. The tax authorities disagreed.

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Authorities and courts: formality counts

The Director of the National Information System and the administrative courts of both instances – including the Supreme Administrative Court – found that:

• At the time of payment of the advance payment, there was no effective declaration of waiver of VAT exemption,

• Thus, the transaction was exempt from VAT and the advance payment invoice did not give the right to deduct tax.

The Supreme Administrative Court clearly emphasized that it is not the intention of the parties , but the actual fulfillment of statutory conditions, that determines the taxability of a supply. The declaration must be submitted before any payment – otherwise, the taxpayer loses the right to deduct VAT from the advance payment.

Judgment of the Supreme Administrative Court of 24 June 2025, file reference number I FSK 540/22