After referral from the Supreme Court, the Arnhem District Court recently ruled in a case involving the purchase of a building by two dentists. The dentists intended to renovate the building and then lease it to the company through which they exercise their dental surgery. The court ruled that from the moment of its purchase the building fell under the Box 1 facility for making assets available (“TBS facility”).
Commencement of facility for making assets available
As a general rule, the TBS facility is applicable at the time the relevant asset actually becomes available for use by the company in which the taxpayer or affiliated individual has a substantial interest. However, on January 22, 2010, the Supreme Court made an exception to this general rule. The case concerned a married couple ─ both dentists ─ that had purchased a building, and after renovating it intended, as private individuals, to lease it to the company through which they exercise their dental surgery. In dispute was the moment at which the TBS facility was applicable to the building: immediately at purchase or only when the building was actually taken into use by the company. The Supreme Court ruled that the TBS facility applied to a property at the moment of purchase if:
1. the taxpayer purchased the property with the intention of making it available to the company, and made the property ready for that use;
2. the parties’ joint intention was confirmed in writing beforehand;
3. from the time of purchase no other use has taken place.
No written agreement
According to the Supreme Court, if no written agreement is present, then the moment of purchase can still apply as the starting point for the TBS facility if the purchase and preparation for use occurs under such circumstances that, if the user would have been a non-affiliated individual, the purchase and preparation for use would have been coordinated with him beforehand. In the case in question, no written agreement existed. The Supreme Court referred the case to the Arnhem District Court to investigate whether the “coordination criterion” was met. The Arnhem District Court has now decided that this was the case. The renovation of the building, in particular the wiring and plumbing systems for the surgeries, was so specific to a dental surgery that, if a future tenant had been a third party, this most certainly would have been coordinated with him.