In his Opinion of 13 May 2026, Advocate General Martín y Pérez de Nanclares addressed a question the Court of Justice had not previously had to confront: can the transfer-of-a-going-concern (TOGC) relief under Article 19 of the VAT Directive 2006/112/EC apply when a business passes, by way of gift, to two non-taxable individuals in equal shares, who then immediately contribute their shares in kind to a partnership that continues the activity?

The Opinion, delivered by the A-G before the General Court in case T-366/25 (Szytelbiecka), concerns the dividing line between a non-taxable transfer of a business under Article 19 and a taxable deemed supply under Article 16 of the Directive. A gift of business assets to non-taxable persons is, in principle, a deemed supply on which VAT becomes due, unless TOGC relief takes the arrangement outside the scope of VAT altogether. The question reached Luxembourg only because the taxpayer chose to route the succession through her daughters rather than transferring the business directly to the partnership they already operated together.

Facts, Background and the Dispute

D.B. operates a VAT-registered business in Poland and intends to transfer it, by way of gift, to her two daughters, A.K. and P.K., who will each receive a 50% share. A.K. and P.K. already run their own VAT-registered partnership ('P.') and intend to contribute their respective shares of their mother's business to that partnership as contributions in kind, continuing the activity in essentially unchanged form.

D.B. requested a tax ruling from the Polish tax authority on the VAT treatment of the gift. The authority took the view that each daughter would acquire only a share in the various components of the business, not the business itself: a fractional interest does not allow for the autonomous pursuit of an economic activity, and in any event the activity would ultimately be carried on not by the daughters but by the partnership to which they intended to transfer their shares. The Wojewódzki Sąd Administracyjny w Poznaniu upheld that position, and D.B. appealed in cassation to the Naczelny Sąd Administracyjny, which referred the matter to the Court of Justice; given its subject-matter, the case was then transferred to the General Court.

The referring court identified two competing readings of Article 19. Under a transaction-by-transaction reading, the gift of a 50% share to each daughter cannot amount to a transfer within the meaning of that provision, since neither daughter receives enough to pursue an autonomous economic activity, and neither intends to continue that activity herself rather than passing it on. Under a functional reading, the series of transactions should instead be assessed as a whole, as together pursuing the transfer of the entire business and the continuation of its economic activity, so that Article 19 would apply.

Legal Framework

Article 19, first paragraph, of the VAT Directive allows Member States to treat a transfer of the whole or part of a totality of assets as not involving a supply of goods, with the recipient stepping into the position of the transferor. Settled case law, running from Zita Modes (C-497/01) through Schriever (C-444/10), X (C-651/11) and the order in Dyrektor Izby Administracji Skarbowej w Łodzi (C-729/21), establishes two cumulative conditions: the assets transferred must be sufficient to allow the autonomous pursuit of an economic activity, and the transferee must intend to operate that business, rather than immediately liquidating it.

Less familiar, and central to this Opinion, is the wording of the provision itself: it refers throughout to 'the transferor' and 'the person to whom the goods are transferred' in the singular. Drawing on this, and on X (C-651/11) and the order in Határ Diszkont (C-427/23), the A-G reads Article 19 as requiring, in principle, one identifiable transferee stepping into the transferor's VAT position, though this reading is his own construction rather than a point the Court of Justice has so far settled in this exact context.

The A-G's Analysis

The A-G structures his reasoning around two questions: first, whether a totality of assets can, for Article 19 purposes, pass to more than one person at all; second, whether the gift and the subsequent contribution can nonetheless be treated as a single transaction.

On the first question, a literal, contextual and teleological reading of 'the person to whom the goods are transferred' leads the A-G to conclude that this is a deliberate legislative choice rather than a drafting accident: the phrase is singular in every language version, the predecessor in the Second Directive spoke of a single transferee 'continuing the person of the contributor', and because Article 19 has the transferee step into the transferor's shoes, including for capital goods adjustments, there must, on his reading, be one identifiable successor who can carry that position forward. On this view, a totality of assets can pass to one person only, even though it may itself be split into several partial transfers, each to its own single transferee.

Applied to the facts, A.K. and P.K. do not hold their shares jointly; each acquires a separate 50% interest in every asset. There are, in reality, four distinct transactions: two gifts and two contributions in kind. Examined separately, neither gift satisfies the first condition, since a 50% share does not permit autonomous economic activity, and the A-G doubts the second condition is met either, since the daughters intend to continue the activity only through their partnership and neither intends to become VAT-liable herself. On the A-G's reading, Article 19 therefore does not apply transaction-by-transaction, nor would it apply if both gifts were treated as one transaction between D.B. and her daughters jointly, since his interpretation of the provision requires a single transferee.

The A-G then tests whether 'economic reality' can displace that outcome by assessing the four transactions together, in line with their evident purpose of continuing D.B.'s business. He acknowledges the attraction of this functional reading, and even states that it initially struck him as the more logical of the two, but rejects it for three reasons.

First, the transactions do not form a single composite supply under the Court's established test, which requires elements supplied by one taxable person to one customer that are either inseparable or in a principal/ancillary relationship; here different persons are involved throughout, and each transaction retains its own independent economic rationale, with only the parties' shared intention connecting them.

Second, treating the partnership as the true 'ultimate' transferee, with the gifts as a transient step, would align with the single-transferee requirement, but would need a workable test for how quickly the contribution must follow the gift; the Directive offers no such benchmark, and any line drawn would simply relocate the uncertainty.

Third, and most fundamentally, the Court has consistently held that requiring the tax authority to investigate subjective intentions undermines legal certainty and the objective application of VAT. Each transaction here is, on its own terms, clear, and nothing prevented D.B. from transferring her business directly to the partnership, as she acknowledged at the hearing. Having chosen to route the transfer through a gift instead, she and her daughters must accept the consequences of that choice, and 'economic reality' cannot be used to subordinate the actual legal effects of the parties' choices to their underlying intentions. This result would also sit uneasily with fiscal neutrality.

Proposed Answer

Weighing the two approaches, the A-G ultimately favours the transaction-by-transaction reading. He proposes that the Court answer the preliminary question as follows: Article 19 of the VAT Directive must be interpreted as meaning that there is no transfer of the whole of a totality of assets where a taxable person transfers, free of charge, 50% of such a totality to each of two non-taxable natural persons, even where those persons intend to contribute their respective shares, without delay and as a contribution in kind, to a partnership that pursues an economic activity and of which they are the partners.

On this view, the gifts from D.B. to A.K. and P.K. fall outside Article 19 and are, in principle, taxable as deemed supplies under Article 16, a point the A-G notes is for the referring court to confirm under the relevant Polish transposing provision. Whether the daughters' subsequent contributions to their partnership can themselves benefit from Article 19 relief is the subject of separate proceedings, and falls outside the scope of this Opinion.

Conclusion

This Opinion matters for VAT planning around intergenerational business succession structured through a gift to multiple heirs. It confirms that Article 19 relief is not available merely because a series of transactions, viewed as a whole, achieves the continuation of an economic activity that the relief is designed to facilitate; the provision instead requires, transaction by transaction, a single transferor and a single transferee, each of whom independently satisfies the conditions for relief.

At the same time, the A-G's own hesitation stands out. He explores, and ultimately sets aside, a more functional reading built on 'economic reality', a concept the Court has used repeatedly but never defined. His own working description, that economic reality means looking at transactions for what they actually are, having regard to commercial logic, sits uneasily with his conclusion that a sequence of closely connected, near-simultaneous transactions pursuing one evident commercial outcome must nonetheless be assessed in isolation. 

For advisers structuring a succession through multiple heirs, a direct transfer to the ultimate operating entity, where legally available, avoids this difficulty altogether; routing the transfer through intermediate individual gifts, even when followed within days by a contribution in kind, currently risks falling outside TOGC relief on each leg of the chain.

Whether the General Court follows its A-G, and whether it engages with 'economic reality' at all or instead disposes of the case on the narrower ground that the immediate transferees were non-taxable individuals who could not themselves continue the autonomous economic activity or step into the transferor's VAT position, remains to be seen. Either way, T-366/25 confirms that, in EU VAT law, the chosen legal form of a succession of transactions, and not merely its eventual commercial destination, determines its tax treatment.