- The European Court of Justice (ECJ) recently made a judgment regarding the right to deduct VAT from services provided by a holding company to its subsidiaries.
- The case involved a German company, W, which deducted the entire VAT amount paid on input transactions, including non-monetary contributions to subsidiaries and accounting and management services.
- The German tax authority refused to recognize the right to deduct input VAT, arguing that the contributions were gratuitous and not subject to commercial exchange.
- The case reached the Federal Court of Germany, which asked the ECJ preliminary questions regarding the holding company’s right to deduct input VAT.
- According to the ECJ, a holding company is entitled to apply VAT deduction if it has the status of a taxable person and uses goods and services from which input VAT is deducted for the purposes of its own taxable output.
- The holding company may be entitled to deduct input VAT paid if the input transactions are directly related to its own transactions and reflected in the price of output transactions or part of its general costs.
- A holding company whose sole purpose is the acquisition of shares in other companies does not have the right to deduct VAT.
- In the given case, the holding company did not have the right to deduct input VAT from fulfillment procured from third parties, which were then put into subsidiaries for a share in total profit, as the input transactions were not directly related to the holding company’s own transactions and did not belong to its general costs.
Source: accace.com
Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.
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