The right to deduct VAT when transferring expenditure free of charge

• The Supreme Administrative Court ruled that a regional railway company had the right to deduct VAT on purchases related to the construction and modernization of stops on land used by the national railway infrastructure operator.
• The company provided the expenditure on these buildings free of charge, with the aim of increasing the attractiveness and efficiency of its railway lines.
• The tax office argued that since the company knew in advance that the expenditure would be transferred free of charge, it did not have the right to deduct tax.
• However, the Supreme Administrative Court rejected this argument, stating that the right to deduct VAT does not depend on the existence of a taxable activity.
• In this case, the goods and services were used for the company’s business activities, and therefore the company had the right to deduct VAT.
• This ruling is seen as a positive signal for taxpayers engaging in similar infrastructure projects.

Source Deloitte

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