- The Dutch District Court has ruled that a private equity fund is not entitled to recover VAT on transaction costs incurred during the investment process.
- The fund had acquired a target company indirectly via a BidCo and paid for services including due diligence investigations, legal and tax advice, and preparation of transaction documentation. The fund argued that it qualified as a VAT taxable person for the structuring and support rendered to BidCo and for arranging a supervisory board member for the target.
- However, the Dutch Tax Authorities denied this right of deduction, and the court agreed that the fund was the end-consumer of the acquired services, with no direct link between the costs made and the activities towards BidCo.
- The ruling could have severe implications for the private equity sector, and the fund has already submitted an appeal against the judgment.
Source Deloitte
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