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Holding company’s input VAT deduction for procured services passed on to subsidiaries

Under what conditions is a holding company entitled to deduct input VAT? This is a recurring question. Last week, the Federal Fiscal Court published a decision in which an (interim) holding company passed on the costs of input services to its subsidiaries without a profit mark-up. In principle, this constitutes an entrepreneurial activity and thus entitles the holding company to deduct input VAT. However, caution is required to ensure that the holding company does not merely make (non-taxable) shareholder contributions to its subsidiaries.