The sale of building land by an individual is in principle outside the scope of VAT: it is mere management of private assets. But the CJEU, in its rulings of 15 September 2011 (Slaby, C-180/10 and Kuć, C-181/10), followed by the French Conseil d'État, established the concept of active land-marketing steps: an individual who deploys, with a view to the sale, means similar to those of a producer, a trader or a service provider becomes an occasional taxable person within the meaning of article 256 A of the French Tax Code, and the sale becomes subject to VAT. Servicing works, plot division, professional marketing, intermediation: all these elements may trigger the shift. This page sets out the operational analysis grid.
In its two rulings of 15 September 2011 (Słaby, C-180/10 and Kuć, C-181/10), the CJEU drew a line between the mere management of private assets (outside the scope of VAT) and an economic activity within the meaning of article 9 of the VAT Directive (transposed by art. 256 A of the French Tax Code). The criterion adopted: the deployment, in preparation for the sale, of means similar to those used by a producer, a trader or a service provider.
The Conseil d'État transposed this grid into French law, holding that the sale of building land by an individual is subject to VAT where it goes beyond mere asset management and results from active land-marketing steps involving means similar to those of a professional. See in particular CE 9 June 2020, no. 432596, which clarifies how the habitual and professional nature of the activity is characterised under the Słaby case law.
The consequences are heavy: VAT charged at 20% on the sale (recoverable where the purchaser is itself a taxable person), filing obligations under the taxable-person regime (VAT returns, records, etc.), and potential reassessment of earlier sales within the 3-year reassessment period (extended to 10 years in the event of a hidden, undeclared activity). The grid of indicators must be mastered in order to make the right choices upstream.
The analysis rests on a body of converging indicators. It is never a single element that triggers the shift, but their accumulation.
Carrying out servicing works on the land (connection to water, electricity and sewerage networks, roads) in preparation for the sale is the clearest indicator. Such works involve a financial and operational commitment that goes beyond mere asset management and directly gears the property towards marketing to builders.
The division of a parcel into several distinct plots, followed by their separate marketing, is a strong indicator of active steps. Creating new co-ownership lots or cadastral divisions with a view to resale departs from the preservation of private assets and follows the logic of a professional land developer.
The use of established marketing means also characterises active steps: engaging an estate agent or a professional agent across several plots, advertising hoardings, listings on specialist websites, sales brochures, active canvassing of builders and developers.
Obtaining permits (development permit, building permit, various authorisations) ahead of the sale is a further indicator. An individual who personally files a development permit to enhance the value of the land with a view to resale is engaging in a development approach that goes beyond the simple sale of existing assets.
The creation of a dedicated vehicle (an SCI, a development SAS) or the use of professional advisers (surveyors, town planners, planning-law specialists) to run the operation reinforces the characterisation of active steps. Conversely, the isolated sale of inherited land, without preparatory steps, remains in principle outside the scope of VAT.
The firm advises individuals holding land assets (inheritances, family ownership splits, divisions of rural estates) on the characterisation of their disposal operations. The objective: avoiding an unintended shift into VAT liability, or deliberately structuring the operation as a taxable person in order to benefit from the associated advantages (recovery of input VAT, optimisation for taxable purchasers).
In the event of a tax audit or reassessment, we build the defence around the characterisation of the indicators, the economic coherence of the operation and legal certainty for earlier periods.
When, in preparation for the sale, the individual deploys means similar to those of a producer, a trader or a service provider, under the grid laid down by the CJEU in the Słaby (C-180/10) and Kuć (C-181/10) rulings of 15 September 2011. The simple sale of land that was inherited or held as a private asset, without preparatory works or organised marketing, remains in principle outside the scope of VAT.
Three types mainly: (1) servicing works (network connections, roads); (2) plot division and creation of separate lots; (3) obtaining planning authorisations with a view to enhancing value. An operation combining several of these elements gives rise to a strong presumption of active steps.
Not in itself. Engaging a standard estate agency to sell inherited land remains compatible with mere asset management. But the combination of professional intermediation with other indicators (subdivision, servicing works, active canvassing of developers) tips the analysis. It is the accumulation that characterises active steps.
Three main ones: (1) VAT charged at 20% on the sale price; (2) filing obligations (registration, monthly or quarterly VAT returns, records of transactions); (3) correspondingly, a right to deduct input VAT on servicing works and preparatory costs (a substantial advantage). Where the purchaser is a taxable person, the VAT is generally recoverable by the purchaser, and therefore economically neutral.
The reassessment period is in principle 3 years (LPF art. L.176). But if the individual has neither declared the activity nor registered, the tax authorities may invoke a hidden (undeclared) activity (LPF art. L.176) and extend the period to 10 years, with in addition the 80% surcharge under art. 1728, 1, c of the French Tax Code. The defence involves demonstrating an excusable error or challenging the characterisation of active steps. See our analysis of the hidden (undeclared) property-dealer activity.
Three lines of action: (1) a pre-transaction analysis of the body of indicators with a tax lawyer; (2) explicit structuring of the vehicle (remaining within private assets, or knowingly creating a taxable structure); (3) an informed choice between VAT exposure (with input-VAT recovery) and remaining outside the scope. An upstream audit costs far less than a subsequent reassessment.
Dividing an inheritance into family lots (lifetime gift with division, estate partition) is not, in itself, an active marketing step. But if the heirs then organise the coordinated marketing of their lots, with collective servicing works and marketing efforts, the analysis changes. Particular vigilance is required for co-ownerships in indivision that decide to develop the land before selling.
Topics frequently linked with active land-marketing steps.
General framework of real-estate VAT: scope, regimes, options, exemptions.
Voir la page VATOverview of the regimes applicable to real-estate transactions.
Voir la page VATCriteria for mere management of private assets outside the scope.
Voir la page Property dealerRisk of recharacterisation in the event of undeclared transactions.
Voir la pageA confidential initial discussion to analyse the body of indicators, decide on VAT exposure, and secure or defend your operation.
© BENSAID Avocats — The information on this site does not constitute legal advice and is no substitute for personalised tax analysis.