Case: Input VAT relating to free eye examinations in respect of sales of (sun)glasses

A Oy engaged in sales of optical products, such as eyeglasses and sunglasses, subject to VAT. The company also had sales of tax-exempt health and medical care services, such as eye examination services. The company had not charged its customers for eye examinations performed by an optician related to the sale of eyeglasses and sunglasses (so-called free eye examinations).

In the case, it was to be decided whether the purchases used for the eye examinations performed by the company’s opticians were to be considered to be in use entitling the company’s VAT deduction when the company did not charge its customers a separate consideration for the eye examination related to the sale of eyeglasses and sunglasses.

The taxable sale of eyeglasses or sunglasses and associated lenses required an eye examination to be performed in order to select and manufacture the right type of lenses. The purpose of the free eye examinations performed by the company’s opticians was to lead to the company’s taxable sales of eyeglasses or sunglasses. The Supreme Administrative Court held that the eye examinations performed by the company’s opticians were objectively related to the taxable sale of eyeglasses or sunglasses, and that the free eye examination did not constitute an activity outside the scope of VAT, separate from the company’s taxable business.

Purchases made for free eye examinations related to the sale of eyeglasses or sunglasses had to be considered to have a direct and immediate connection to the company’s business that entitles it to a deduction within the scope of VAT.

The company was deemed to have the right to deduct the value added tax included in purchases related to the performance of eye examinations, based on § 102 subsection 1 point 1 and § 117 of the VAT Act, to the extent that they were used for free eye examinations performed by opticians related to the sale of eyeglasses or sunglasses.

Source: kho.fi

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