VAT treatment of transfer of business in the EU

By / In EU VAT / December 7, 2023

The situation of business transfer arises, for example, when an Amazon account is sold to another legal entity. The question of taxation of such a transaction often arises. The situation is often complicated by the fact that the account is sold along with goods remaining in warehouses in different countries. One of the ways to sell an account is the Transfer a business as a going concern scheme – TOGC.


VAT Liability:

The regulation of the Transfer of a business is based on a single legislative framework – Article 19 of Directive No. 2006/112/EC (“VAT Directive”), which states:

In the event of a transfer, whether for consideration or not or as a contribution to a company, of a totality of assets or part thereof, Member States may consider that no supply of goods has taken place and that the person to whom the goods are transferred is to be treated as the successor to the transferor.

However, Member States may, in cases where the recipient is not wholly liable to tax, take the measures necessary to prevent distortion of competition. They may also adopt any measures needed to prevent tax evasion or avoidance through the use of this Article.

It seems clear that the EU rule leaves to the member states the possibility to derogate from the qualification of supply of goods by the intrinsic nature of some or all of the assets that may constitute a business.

The option given to the member states whether to classify a transfer of a going concern as a supply of goods has the objective of not burdening the financial resources of businesses where the application of VAT on the transfer of a business could lead to situations of financial instability for the businesses involved in the transaction.

We see confirmation of this thesis in numerous judicial practices in France, Italy, and Spain, where the principles of TOGC are mainly set out in the EU Court of Justice and case law, as well as in guidance from tax authorities.



Basis (Article of Law)


United Kingdom
Section 44 of the Value Added Tax Act 1994 (VATA).

The Value Added Tax Regulations 1991 (SI 1991/2201), Regulation 50

“The supply of an asset (including intangible fixed assets) forming part of a business or a part of a business where the supplier is making the supply as going concern” (section 44(1) of VATA).
Section 15(1) of the Umsatzsteuergesetz (UStG).

The Umsatzsteuergesetz (UStG), § 27a

“Der Verkauf eines Unternehmens oder eines Unternehmensteils, der einen wirtschaftlichen Betrieb umfaßt, ist steuerfrei.” (The sale of a business or a part of a business that encompasses an economic operation is tax-free).
Article 261C of the Code général des impôts (CGI).

The Code général des impôts (CGI), article 271

“La cession d’une entreprise ou d’un élément d’actif constituant une branche complète d’activité est exonérée de taxe sur la valeur ajoutée” (The transfer of a business or an asset that constitutes a complete business branch is exempt from value-added tax).
Article 20.2.b) of the Ley del Impuesto sobre el Valor Añadido (LIVA).

The Ley 37/1992, de 28 de diciembre, del Impuesto sobre el Valor Añadido, article 84

“La transmisión de la totalidad de un patrimonio empresarial, o de una parte determinada de él, que se realice como actividad económica.” (The transfer of the totality of a business asset, or a specific part of it, which is carried out as a business activity).
Article 2, paragraph 3, subparagraph d) of the Italian VAT Decree (Decreto Legislativo n. 633/1982) “La cessione di azienda o di ramo di azienda, nonchè l’apporto di azienda o ramo di azienda” (The transfer of a business or a branch of business, as well as the contribution of a business or a branch of business) are exempt from VAT.
Section 3, paragraph 2 of the Swedish VAT Act (Mervärdesskattelagen). “Överlåtelse av tillgångar som ingått i rörelse och som tillgångarnas förvärvare fortsätter att använda i rörelse är befriad från skatt enligt denna lag.” (The transfer of assets that have been part of a business and that the acquirer of the assets continues to use in the business is exempt from tax under this Act).
Article 6, paragraph 1, subparagraph b) of the Dutch VAT Act (Wet op de omzetbelasting). “De levering van een onderneming … is onbelastbaar.” (The supply of a business … is exempt from tax).
Article 43, paragraph 1, paragraph 1, item 2 of the Polish VAT Act (Ustawa o podatku od towarów i usług). “Dostawa przedsiębiorstwa lub jego zorganizowanej części, z wyjątkiem nieruchomości, jest zwolniona od podatku.” (The supply of a business or its organized part, except for real estate, is exempt from tax).


Summary: When goods are transferred as part of a TOGC, the transfer is treated as outside the scope of VAT. This means that the seller does not have to charge VAT on the transfer, and the buyer does not have to pay VAT on the acquisition of the goods.

When a business transfers goods as part of a TOGC, the transferee is not liable to pay VAT on the goods, even if the transferor had previously claimed input tax on them. This is because the transfer of goods as part of a TOGC is considered to be a disposal of the goods, and disposals of goods are outside the scope of VAT.

As a result, the transferor does not need to reinstate the input tax that they claimed on the goods when they sell them as part of a TOGC. This is because the input tax has already been used to offset the output tax that the transferor charged on its sales.



  • Parties should sign a transfer of business agreement with all details of the transferrable business and the price for it.
  • A seller entity should deregister from VAT in the local country as it is no longer carrying on business in the country.
  • A Seller entity should submit a final VAT return for the period up to the date of the transfer of business.
  • A seller party should provide a copy of the business transfer agreement to the local tax authority.


Tax risks:

As soon as the transfer is going in multiple countries assets and obligation transfer should be shown separately for each country. All tax accounting documents need to be issued in the national languages of each country. Local tax authorities may not agree that the transfer of inventory as part of a business is tax-free or may require additional supporting documentation. In case a tax office doesn’t accept the proof of exempted transaction company may need to reinstate the input tax.


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