Article 257 bis of the CGI: the VAT relief applicable to the transfer of a going concern

In its wording in force since 1 January 2023, it provides that upon the transfer, for consideration, free of charge or by way of contribution, of a totality of assets or part thereof carried out between VAT payers, no supply of goods or services is deemed to take place: the transactions included in the transfer are relieved from VAT. The transferee is deemed to continue the person of the transferor, in particular for the adjustments of the tax deducted. The provision transposes Articles 19 and 29 of Directive 2006/112/EC, and the administrative guidelines comment on it at BOI-TVA-CHAMP-10-10-50-10.

No. When the conditions are met (transfer of a going concern, continuation of the activity, transaction between VAT payers), the relief applies as of right: the parties cannot choose to subject the transaction to VAT for convenience. Conversely, if the conditions are not met, the transaction follows its own regime. VAT invoiced in error on a relieved transaction gives the purchaser no right to deduct, hence the importance of correctly qualifying the transaction before the deed is signed.

Yes, in the classic scenario: a building let under leases subject to VAT (as of right or under the election of Article 260, 2° of the CGI) is sold to a purchaser who carries on the letting activity by taking over the leases. The letting activity then constitutes a going concern being transferred and the sale is relieved from VAT. The solution requires genuine continuity: it becomes debatable where the leases are exempt, where the building is partly vacant or where one of the parties acts with a view to resale.

Because the regime rests on the transfer of an activity intended to be carried on. The Conseil d'État has denied the relief in situations where the transaction amounted to a purchase-and-resale operation rather than the transfer of a letting business, in particular where dealer-resellers or pre-arranged resales were involved. The assessment is concrete: commitments made in the deed, conduct of the parties before and after the sale, regime under which the building was recorded. Documenting the parties' intention is therefore a central element in securing the transaction.

Article 257 bis requires a transaction carried out between VAT payers with respect to the activity transferred. Where the rents are VAT-exempt without an election, for example unfurnished residential lettings, that condition is lacking and the relief is set aside for the activity concerned: the sale then follows the ordinary rules applicable to sales of buildings. For mixed-use buildings, combining leases subject to VAT and exempt leases, the analysis must be conducted with precision, lease by lease, and the administrative guidelines call for caution in these configurations.

This is one of the major benefits of the regime: the input VAT adjustments provided for by Article 207 of Annex II to the CGI, normally due where a building is sold within the twenty-year adjustment period, are not required. The transferee, deemed to continue the person of the transferor, takes over the running adjustment period and will bear, where applicable, future adjustments. The transferor must hand over the information needed to track the deduction ratios attached to the building.

The deed should record the elements on which the relief rests: description of the going concern transferred, takeover of the current leases, commitment by the purchaser to carry on the letting activity subject to VAT, handover of the information relating to the running adjustments, and a clause dealing with the consequences of a possible challenge. Both parties must also report the amount of the transfer on their VAT return, among non-taxable transactions. A prior review of the VAT treatment of each lease usefully completes the arrangement.