The situation
A commercial lease for an office building and the tenants’ activities
A client, a property fund, owns a refurbished office building in Düsseldorf and a smaller one in Utrecht. It wants to charge VAT on the rent so it can recover the VAT on the works. The tenants are a software company, an insurance broker and a medical practice.
Everyone knows letting is exempt. The hours go on the option: who qualifies, how much of each tenant’s use must be taxable, how the option is made and documented in each country, and what happens to the input VAT if a tenant changes. The fund wants it in one note, per building.
What the research has to settle
The rules behind the answer
- Letting is exempt by default
- The VAT Directive exempts the letting of immovable property and allows member states to let landlords opt to tax. Germany and the Netherlands both allow the option, on different conditions.
- Germany looks at the tenant’s use
- German law allows the option only for letting to a business that uses the premises for supplies that do not exclude input VAT deduction. A tenant making exempt supplies, such as an insurance broker or a medical practice, blocks it for its space.
- The Netherlands sets a minimum taxed use
- Dutch law allows taxed letting only where the tenant uses the property for activities that give a right to deduct for at least a set share, generally 90%. Landlord and tenant opt jointly, usually in the lease or a joint request.
- The option drives the input VAT
- Where the option fails for part of a building, the VAT on the works is not deductible for that part. Later changes of use are corrected through the capital goods adjustment over a multi-year period.
How it runs in azta
From the question to the document
The question, as you would type it
Fund owns refurbished office buildings in Düsseldorf and Utrecht. Tenants are a software company, an insurance broker and a medical practice. Can the landlord opt to tax the rent for each tenant in Germany and the Netherlands, and how is the option made and documented?
You start with
A commercial lease for an office building and the tenants’ activities
- 01
Describe the buildings and the tenants
Give the locations, the floor areas and what each tenant does. azta searches the VAT Directive, the German and Dutch VAT acts and the court decisions on the option.
Cited research· Free - 02
Read the conditions in the original
Each condition in the answer is cited. Open the provision in the reader, in German or Dutch, with its in-force status.
Atlas statute reader - 03
Draft the note per building
Ask for a client note with one section per building and a table of tenants, option available or not, and why. Edit it in Canvas.
Canvas · Ask azta· Pro - 04
Send it as Word
Export the note to Word, add your sign-off and send it to the fund.
Word export· Pro You send
A client note on whether and how the landlord can opt to tax the rent
What you get
A client note on whether and how the landlord can opt to tax the rent
Client note · draft
Charging VAT on the rent: Düsseldorf and Utrecht
Düsseldorf. The letting is exempt unless you opt to tax. You can opt for the space let to the software company, which makes taxable supplies. You cannot opt for the space let to the insurance broker or the medical practice, because both make supplies that exclude deduction. The VAT on the refurbishment is deductible only for the space let with VAT.
Utrecht. Taxed letting needs a joint option with the tenant and the tenant’s confirmation that its use meets the minimum share of deductible activities. We recommend recording the option and the confirmation in the lease and asking the tenant to confirm its use each year.
Next steps. Please send us the floor areas per tenant and the tenants’ confirmations of use. A change of tenant or use during the adjustment period may require a correction of the input VAT, so we should see each new lease before it is signed.
Outcomes on your numbers
What azta is worth on this task
Pro pays for itself after
11 minutes a month
At €160 an hour, that is all the time Pro (€27 a month) has to take off your desk to cover its price.
Example figures. Replace them with your own.
- Hours back a year
- 38
- Capacity at your rate
- €6,048
- More client notes on opting to tax rent a quarter
- 2.4
- Return on Pro
- 18.7×
- Research
- Drafting
- Your review
A scenario you set, not a promise. The hours that come back go to another client, or deeper into this one.
Want these numbers on your team’s real workload?
Book a demoSources azta searches here
- EUR-Lex · Curia
- Gesetze im Internet
- Rechtsprechung im Internet
- wetten.overheid.nl
- Rechtspraak.nl
What stays with you
- Confirming each tenant’s actual activities and floor area.
- The position on mixed-use tenants and the advice you sign.
- Drafting the lease clauses with the client’s lawyers.
Frequently asked questions
- Can azta read the lease itself?
- Yes, on Pro. Upload the lease and azta reads it and refers back to the clause it relied on, such as the tenant’s use clause.
- Can it check the rule as it stood when the lease was signed?
- Yes. Give the date and azta focuses on the law as it stood then, with the in-force status of each provision.
- Does it cover the tenant’s side of the question?
- Yes. Ask whether the tenant can deduct the VAT on the rent and azta researches the tenant’s right of deduction under the same acts.
