Can a single transaction create taxable person status?
One of the tests for taxable person status is acting in the market on a continuing basis. The classic Słaby and Kuć judgment shows where the line runs between private assets and a business.
The facts
These joined cases concerned the activities of Mr Słaby and Mr and Mrs Kuć. Słaby had bought agricultural land and used it for farming. After its designation was changed some years later, he divided the land into 64 plots and sold them. The Kuć couple did something similar: they too owned land used for farming which they sold after a change to the local zoning plan.
The question
The central question was whether a natural person who sells their agricultural land, because its designation has been changed to building land against their wishes, must be regarded as a taxable person.
The ruling
The Court held that simply selling building land does not create taxable person status. The number and size of the plots sold were not decisive. Nor did the Court attach weight to the fact that the seller had divided the land before sale in order to obtain a higher overall price, to the period over which the sales took place, or to the proceeds. The sale formed part of the management of private assets.
The outcome would be different had the seller taken active steps comparable to those of a property dealer, such as servicing the land for development or using established marketing techniques. They would then be carrying out an economic activity and be a taxable person.
Why this matters in practice
This classic illustrates when someone is acting in the market on a continuing basis. Merely exercising a right of ownership is not enough.
That matters, for instance, for landowners who bought land privately or inherited it and intend to sell, possibly after dividing it. To stay outside the scope of VAT it is advisable to be as passive as possible: have others look after your interests and do not have the land serviced for development at your own risk and expense, for example by demolishing structures or clearing planting.
The judgment applies far more widely than to landowners alone. For anyone who occasionally enters the market, the question can arise whether that creates taxable person status.