Gratuitously is not always gratuitously (7 Afs 31/2016)

29. 6. 2016

In its recent judgment, the Supreme Administrative Court (SAC) dealt with the transfer of property given by a sole shareholder to a company. The real estate transfer tax was not paid, because it only applies to transfers in return for payment, which might have seemed correct at first glance. The tax administrator, however, reclassified this transfer to a transfer in return for payment, assessing real estate transfer tax.

In this situation, the SAC agreed with the tax administration. The argument was particularly the fact that the value of the shareholder’s real estate declined, but the value of his stake in the company increased. After giving the property to the company, the shareholder would have been able to sell his stake in the joint stock company for a higher price as opposed to the situation in which the act of giving would not have occurred. Therefore, according to the SAC, the transfer could not be classified as a gratuitous transfer.

The SAC’s conclusions thus confirm the interpretation currently held by the tax administration about the relationship between a shareholder and “his or her” company. The performance provided by such a shareholder to the company is essentially not viewed as gratuitous.

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