Contributing Land to a Project Company: Optimised Real Estate Transfer Tax, Clean VAT Handling

Client’s question

Our client planned a project com­pa­ny with a bank. The bank would con­tribute a plot of land as a non-cash con­tri­bu­tion. The goal: min­imise real estate trans­fer tax and ensure a robust VAT set­up, includ­ing a view on future dis­pos­al (sale/lease) and poten­tial risks.

Our advice

We rec­om­mend­ed struc­tur­ing the con­tri­bu­tion with­out a cap­i­tal increase, i.e. as a gra­tu­itous con­tri­bu­tion. This keeps the real estate trans­fer tax on a more favourable base than the mar­ket val­ue.

For VAT, we applied a deemed sup­ply (self-sup­ply) at the con­trib­u­tor and a pass-through invoice under Sec. 12(15) VAT Act to the project com­pa­ny. Cru­cial­ly, this pass-through does not count as con­sid­er­a­tion for trans­fer-tax pur­pos­es, so it does not increase the tax base.

To secure input VAT recov­ery at the project com­pa­ny, we doc­u­ment­ed the intend­ed tax­able use and set out clear rules for invoic­ing, due date and pay­ment. We also cleaned up the legal draft (cor­rect land reg­istry data, con­sis­tent con­tri­bu­tion ter­mi­nol­o­gy) and added a pre­cise VAT pro­cess­ing clause.

Benefits for the client

• Sig­nif­i­cant­ly low­er trans­fer tax due to a gra­tu­itous con­tri­bu­tion with­out cap­i­tal increase.
• VAT cer­tain­ty: input VAT can be recov­ered if the project is pre­dom­i­nant­ly used for tax­able sup­plies.
• Risk con­trol: if exit plans change lat­er, poten­tial VAT adjust­ments are known and doc­u­ment­ed from day one.
• Smooth exe­cu­tion: clear con­tract lan­guage, cor­rect reg­istry data and a straight­for­ward billing/payment flow reduce fol­low-up queries.