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ECJ C-42/19 Sonaecom vs. PT: Input VAT on preparatory activities for acquisition of shares and restructuring that did not happen (newsletters added)

Our previous post about this case can be found HERE

The Portuguese court asked the following questions to the European Court of Justice:

  1. Is Sonaecom entitled to input VAT recovery on advisory services related to market research for the purpose of acquiring capital participations, which acquisition did not take place?
  2. Can Sonaecom claim back the VAT on a commission for arranging and establishing a bond loan – taking into account that this loan would have been entered into with a view to integrating it into the financing structure of the companies in which it owns holdings and which, since those investments did not take place, was ultimately made entirely available to Sonae SGPS, the parent company of the group?

The case bears similarities to other ECJ case law, e.g. Polysar Investments Netherlands C-60/90; Harness & Helmet C-80/95; Portugal Telecom C-496/11.

Today, Advocate General KOKOTT has released an opinion about this case.

  1. Articles 17 and 4 of Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes — Common system of value added tax: uniform basis of assessment are to be interpreted as meaning that a mixed holding company like Sonaecom has the right to full deduction in respect of expenditure for the acquisition of shares in a company to which it intended to supply taxable services. It is for the referring court to determine whether that is the case. The right to deduct also arises if that acquisition ultimately did not materialise and applies irrespective of the amount of VAT payable in respect of the planned services.
  2. The actual exempt transfer of the capital raised from a mixed holding company to the parent company of the group precludes a deduction. The direct link with the exempt service actually provided takes precedence over the original intention to supply taxable services to a subsidiary to be acquired with that capital.

Newsletters/views about this case: