7.2.3 Case 3

An accountancy firm orders the construction of a new office building with four floors. During the construction, the accountancy firm deducts all VAT which it is charged by the construction company. When the new building is put into use, the firm only occupies three floors. The 4th floor remains vacant. Should the input VAT attributable to the 4th floor be adjusted?

The deduction of the input VAT attributable to the 4th floor does not need to be adjusted.

As long as the accountancy firm has the intention to use the 4th floor for taxable purposes it is not required to adjust the deduction. Change in intention may result in the obligation to adjust the deduction.1

No adjustment is required as long as the accountancy firm intends to use the 4th floor for the purpose of taxable transactions, be they accounting services or letting of the floor. Letting of buildings is, as a rule, exempt, but an option to tax is available if the tenant is a taxable person himself and only carries out transactions which do not exclude the input VAT deduction.2

In principle, no VAT adjustment is required, as long as the firm intends to use the 4th floor for taxable transactions allowing VAT recovery.3