Lot exchange and exemption from transfer tax

Many agricultural entrepreneurs have to deal with transfer tax when transferring real estate. A substantial cost item, so it may be interesting to see whether an exemption can be used. An attractive instrument for saving transfer tax is the plot exchange exemption.

In a judgment of the Gelderland District Court of early 2022, it concerned an agricultural entrepreneur who, more than two years after he had made use of the plot exchange exemption, was confronted to his surprise with a hefty additional assessment from the tax authorities. The tax authorities found that the conditions of the lot exchange exemption had not been met. In this ruling, in which the entrepreneur was assisted by me, the court highlights a few important points that you should bear in mind when applying this exemption. Fortunately for the agricultural entrepreneur, the tax authorities pulled in this matter at the short end. 

The Requirements of Voluntary Lot Swap
First let's go back to the voluntary plot exchange within the meaning of the exemption under the Rural Areas Development Act (Wilg). When is this the case? For a voluntary plot exchange, i.e. a land consolidation by agreement within the meaning of the Wilg, it is important that there is a written agreement in which three or more owners undertake to combine certain immovable property, to subdivide the mass in a certain way. and finally divide among themselves.

De Wilg imposes several conditions on the lot exchange. For example, it is important that at least three owners contribute immovable property. There must also be at least two owners who are allocated (exchange) immovable property. A number of additional requirements are also imposed by order in council. It is important, among other things, that the plots involved in the plot exchange must be located outside the urban area and therefore outside the built-up area.

Lot swap also for swept together agreements
What was the case in this statement? The central question was whether swiping together different transactions is allowed in order to meet the conditions for the lot exchange exemption. The tax authorities were of the opinion that the plot exchange exemption had not been complied with, because a purchase agreement had already been concluded prior to the plot exchange agreement for the plots that were involved in the plot exchange. However, the court did not share the position of the tax authorities.

It was immaterial that various agreements had been swept together in the plot exchange agreement that was eventually concluded. Moreover, according to the court, the agricultural entrepreneur had included his intention to exchange the plot in the purchase agreement concluded earlier. The court emphasized that the plot exchange agreement is therefore the starting point for assessing whether the conditions of the plot exchange exemption have been met. According to the court, there is nothing in the way of assessing the combined transactions jointly. In short, the tax authorities had set too strict requirements for the lot exchange exemption.

Whether or not outside the built-up area?
Another important judgment was given by the judge on the second position of the tax authorities: that one of the plots was not located outside the built-up area. If the plot is not located outside the built-up area, the plot exchange exemption under the Wilg does not apply as yet. The tax authorities were also unsuccessful on this point. The court ruled that the factual situation and not the bowl sign that was placed on the road determines whether or not a plot is located within the built-up area. It concerns the design of the rural area and it is therefore important whether the rural character actually predominates. Because this was the case, the court ruled that the plot in question was located outside the built-up area.

In short, the conditions of the lot exchange exemption were met and the substantial additional assessment was fortunately destroyed for the entrepreneur. An important statement, which underlines that the tax authorities may not impose too strict requirements on the plot exchange exemption. However, the entrepreneur must be alert to the conditions that must be met. If immovable property is purchased and it is the intention to make use of the plot exchange exemption, it is advisable, in view of this ruling, to explicitly include this intention in the purchase agreement. It is also good to realize that with the plot exchange exemption, especially in the changing rural environment with the rapid expansion of urban areas, discussions can arise more often about whether or not a plot is located outside the built-up area. An important aspect that you as an entrepreneur should be wary of if you want to make use of the lot exchange exemption.

Marianne Adama

Marianne Adema is a lawyer at Adema Advocatuur and Advice. She specializes in financial law, agricultural law and real estate law. Adema assists many agricultural entrepreneurs and has an advisory and litigation practice. She is also a legal advisor on various wind turbine projects.

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