The Supreme Court of the Republic of Slovenia has issued a judgement regarding the VAT treatment of “sale-and-leaseback” transactions in which it clarified the conditions for when a sale-and-leaseback may be considered a single supply, i.e. as financial service of credit or loans granting.

It follows from the judgment of the Supreme Court and the case law of the Court of Justice of the European Union cited therein, especially cases NLB Leasing d.o.o. v. Slovenia (Case C-209/14) and Mydibel SA v. Belgium (Case C‑201/18), that sale and immediate leaseback of goods between the same parties does not represent two mutual supplies of goods for VAT purposes (even if there are two separate legal transactions) but rather a financial service – a single transaction to increase the liquidity of the taxpayer if:

  1. the seller (lessee) transfers (sells) goods to the buyer (lessor) for the purpose of obtaining funds in a form of a loan, and the latter concludes a financial leasing contract with the lessee for the same goods;
  2. it is demonstrated that the transfer of the goods does not allow the lessor to dispose of the goods in the manner as if it were the owner, which is also the case if the goods remain in the possession of the previous owner, i.e. the lessee on the basis of such a contract.

The actual possibility of using the goods is therefore important, not only the legal aspect of the lessor’s acquisition of the right of ownership (e.g. in the case of real estate the entry of ownership in the land register).

Such single financial transaction is assimilated to granting and the negotiation of credit or loans in monetary form and therefore exempt from VAT.

The above conclusions of the Supreme Court have also been included in the latest guidelines of the Slovenian Tax Authority.