VAT on conversion of perpetual usufruct into a right of ownership. The CJEU judgement, case C-604/19 Gmina Wrocław

On February 25, 2021, the Court of Justice of the European Union issued a judgment in case C-604/19, Gmina Wrocław, regarding VAT on conversion of perpetual usufruct into a right of ownership.

The CJEU indicated that the transformation of the right of perpetual usufruct into full immovable property ownership rights provided for by national legislation against payment of a fee constitutes a supply of goods within the meaning of that provision. The CJEU thus pointed out that there are two taxable transactions – the establishment of perpetual usufruct and its transformation into a right of ownership, both of which concern the same good.

The CJEU indicated also that Gmina Wrocław acts as a taxable person within the meaning of Article 9(1) of the VAT Directive.

The judgment in this respect is consistent with the opinion of Advocate General Kokott issued last year which already then indicated that the tax qualification of fees charged by local governments is not affected by the transfer of ownership to the previous perpetual usufructuary. The transfer of ownership constitutes a continuation of the supply of goods and the transformation transaction consists merely in a modification of the object of the supply.As a consequence of the CJEU judgment, the local governments which, according to the prevailing practice, have so far treated the conversion of the right of perpetual usufruct as falling outside the scope of VAT taxation, may be required to pay the tax.The judgment also means that these entities may be obliged to include VAT in the amount of fee for conversion. On the other hand, the above means that if the conversion is made for the benefit of the taxpayer, the taxpayer will have the right to deduct VAT from the invoice issued by a given local government. A debatable issue is whether the conversion fees may be increased by VAT instead of including them in the amount of the conversion fee.A particularly important issue here is settling the past, i.e. whether local governments may demand a “surcharge” of the amount corresponding to the tax amount or vice versa – taxpayers who paid the transformation fee in previous years may now request an invoice with the tax included in the value of the fee.


If you are interested in obtaining further information, or would like to discuss the impact of the above judgment please contact:

Tomasz Michalik                                tel. + 48 501 733 720
Bartosz Bogdański                           Bartosz.Bogdań        tel. + 48 660 440 140

or your advisor at MDDP


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