Hannes Snellman Counsel to a Taxpayer Receiving Confirmation that a Transfer of a Business at an Early Stage Qualifies as a Transfer of a Going Concern for VAT Purposes
14 June 2019
The Administrative Court has in its decision stated that a transfer of a business at an early stage qualifies as a transfer of a going concern (“TOGC”) in value added taxation and could therefore be carried out exempt of the VAT.
In the present case, a Finnish limited liability company planned to transfer a business in a preparatory stage, with certain agreements and staff already in place.
The Administrative Court, dismissing the appeal by the Tax Recipients’ Legal Services Unit, accepted the taxpayer’s argumentation. The Court noted that the concept of “business activities” in value added taxation is broad, and it also covers preparatory measures. The Court held that the application of the rules regarding tax-neutral transfer of a going concern under Section 19 a of the Finnish Value Added Tax Act when the business is still at an early stage accords with the purpose of Article 19 of the VAT Directive and is in line with the EU case law.
Restructuring of a business at an early stage may be necessary for multiple reasons, including the acquisition of additional funding for future growth phases. The decision presents an important guideline for the interpretation of the VAT legislation, and it is of particular significance for any company planning to restructure a new business at an early stage.