The European General Court of the EU handed down its preliminary ruling on the VAT treatment of the contribution of immovable property to a wholly owned company. The court found, among others, that EU members generally cannot restrict the no-supply treatment for full asset transfers unless justified to prevent competition distortion, tax evasion, or tax avoidance.
In a request for a preliminary ruling from Portugal the ECJ held, that the national legislation which provides taxation of a transaction involving the formation of a capital company the share capital of which is fully paid up by means of shares held in other companies owning immovable property, and which receives as consideration the entire share capital of the company thus formed contravenes the Directive 2008/7/EC concerning indirect taxes on the raising of capital.
