In an assets and liabilities transaction, you transfer the assets and liabilities of your sole tradership to a newly incorporated private limited company (bv). A question that is often overlooked: do you also need to pay VAT on that transfer? The answer depends on the specific situation and the nature of the assets being transferred. In this article, you can read when the transfer can take place free of VAT and what you need to watch out for.
What is an assets and liabilities transaction?
When converting a sole tradership to a private limited company via an assets and liabilities transaction, the sole tradership sells its assets to the bv. Think of machinery, stock, trade debtors, goodwill, and any business premises. The bv pays a purchase price for these, or a debt or current account is recorded.
This is a legally and fiscally straightforward process, but it raises questions about the VAT treatment. Ordinarily, the supply of goods and services is subject to VAT. However, there are exceptions that apply particularly frequently in the context of business transfers.
The VAT exemption for the transfer of a totality of assets
The European VAT Directive and the Dutch Turnover Tax Act provide a special facility: the transfer of a totality of assets. When you transfer an entire business or an independently operating part of it, VAT does not, in principle, need to be charged on that transfer.
The Tax and Customs Administration regards this as a situation in which the acquirer — in this case your bv — simply continues the business. Because no real consumption takes place from an economic perspective, the imposition of VAT is not appropriate.
When does a totality of assets exist?
Not every transfer of assets qualifies automatically. There must be a collection of resources with which a business can be operated independently. In practical terms, this means that the bv must be able to genuinely continue the activities of the sole tradership using the acquired assets. If only individual business assets are sold, the exemption generally does not apply.
VAT on individual assets
If the assets and liabilities transaction does not encompass an entire business, or if certain assets are transferred separately, the standard VAT rules apply. This means:
- The supply of movable goods (machinery, fixtures and fittings, stock) is in principle subject to 21% VAT.
- The transfer of trade debtors is exempt from VAT, as it is classified as a financial service.
- Goodwill is generally classified as a service and is taxable, unless the totality-of-assets exemption applies.
- The transfer of business premises has its own VAT rules: the sale of a new property is taxable, the sale of an older property is exempt, unless both parties opt for a taxable supply.
It is therefore crucial to assess which VAT regime applies to each individual asset.
VAT and real estate: a point to note
Business premises deserve particular attention. If your sole tradership owns a property on which VAT was reclaimed on purchase or renovation, the capital goods adjustment scheme comes into play. When the property is transferred to the bv within the adjustment period (ten years for real estate), a VAT correction may be required.
Plan een vrijblijvend gesprek en ontdek wat we voor je kunnen betekenen.
Plan een gesprekFurthermore, if the property is let on a VAT-taxable basis, you must check whether the bv can continue the VAT position without difficulty. This touches on both the tax advice aspect and the administrative side of the transfer.
Practical points to consider regarding VAT and the assets and liabilities transaction
When preparing your assets and liabilities transaction, bear the following points in mind:
- Establish whether the transfer as a whole qualifies as a totality of assets, so that the VAT exemption can be applied.
- Document the transfer properly in an assets and liabilities agreement, including the VAT treatment for each item.
- Check the VAT reclaim history of transferred business assets and properties to avoid adjustments.
- Ensure the bv is registered with the Tax and Customs Administration and has its own VAT number in place before the transfer takes place.
- If in doubt, seek advance certainty from the Tax and Customs Administration via a ruling or by consulting an accountancy and tax specialist.
- Do not forget that after the transfer, the bv must submit its own VAT returns and maintain accurate records.
What does this mean in practice for you as a business owner in Eindhoven?
For many business owners in Brabant who wish to convert their sole tradership, the assets and liabilities transaction can be fiscally attractive — provided the VAT aspects are handled correctly. An error in the VAT treatment can lead to an additional assessment, interest charges, and sometimes a penalty. These are costs you would rather avoid.
The VAT exemption for the totality of assets is a powerful facility, but it requires careful assessment of the specific situation. Every transfer is different, and what applies to one business owner need not apply to you. It is therefore well worth going through this with a specialist before the transfer takes place.
Why Belastingadviseur Eindhoven
At Belastingadviseur Eindhoven, we are happy to think through the VAT consequences of your assets and liabilities transaction with you. Whether you run a small sole tradership or a business with multiple assets and real estate: we map out the VAT risks and ensure the transfer proceeds in a fiscally correct manner. As part of Adviesgroep Eindhoven, we also offer a comprehensive approach: from tax advice and accounting to full support with incorporating your private limited company.
Would you like to know how the VAT rules work out for your situation? Please feel free to contact us without obligation. We are glad to help you on your way.
Frequently asked questions
Is an assets and liabilities transaction always VAT-free?
No, not automatically. The transfer is only VAT-free when it concerns a totality of assets: a collection of business assets with which the bv can independently continue the business. When individual assets are transferred, the standard VAT rules apply.
What is a totality of assets for VAT purposes?
This is a European VAT concept referring to the transfer of a complete business or an independently operating part of it. If the purchaser (the bv) is able to genuinely continue the business activities using the acquired assets and liabilities, a totality of assets exists and the VAT exemption applies.
What happens with the VAT on business premises upon transfer?
This depends on the age of the property, the VAT reclaim history, and the arrangements between the parties. For a property less than two years old, a VAT-taxable supply applies in principle. For an older property, the supply is exempt, unless both parties opt for a taxable supply. In addition, the capital goods adjustment scheme comes into play if VAT on the property was previously reclaimed.
Must the bv already have a VAT number before the assets and liabilities transaction?
Yes, the bv must be registered with the Tax and Customs Administration and have its own VAT number at the time the transfer takes place. Otherwise, the bv cannot submit VAT returns or reclaim VAT on the acquired assets where applicable.
We are happy to think along with you. For advice tailored to your situation we would gladly sit down with you. No rights can be derived from the content of this page and it may contain inaccuracies.
