The ECJ has ruled that a holding company is sometimes not entitled to deduct input tax if it contributes services purchased from third parties in exchange for a participation in subsidiaries.
A German holding company was engaged in the acquisition, management and operation of real estate. She was also involved in the design, remediation and implementation of construction projects. The holding company had majority interests in two companies. These companies mainly carried out exempt construction activities. The holding company and the minority shareholders in the two aforementioned companies agreed that the holding company would make a contribution in kind. That contribution consisted of the provision of management and accounting services free of charge. The holding company provided these services partly itself with its own personnel and materials and partly by purchasing goods and services from other companies.
Source Taxence
See also
- ECJ C-98/21 (Finanzamt R) – Judgment – No Input VAT recovery by holding for free services to subsidiaries that perform mostly VAT exempt activities
- ECJ Cases on Right to deduct VAT by Holding companies related to their subsidiaries (Art. 167, 168, 173)
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