VAT Info 09: Input VAT Treatment for Holding Companies

Here are the key substantive elements from VAT Info 09 of the ESTV, focused on input VAT for holding companies:

Definition and Framework

• Holding as a Business Activity:
  Acquiring, holding, and selling participations (minimum 10%) is considered a business activity under Art. 29 paras. 2 and 3 of the VAT Act (MWSTG) and allows for input VAT deduction.
• Limitation of ‘Holding Company’:
  A holding qualifies as such only if managing participations is its sole main activity, and additional activities are permitted only as ancillary activities under strict conditions.

Main vs. Ancillary Activities

• Main Activity:
  Merely managing participations.
  Additional activities, such as interest or property management, are only recognized as ancillary if they account for less than 10% of total business costs (including related costs).
• Ancillary Activity:
  If more than 10% of costs are incurred for other activities, this is no longer an ancillary activity but a second main function.

Consequences for VAT Deduction

• Only Holding as Main Function:
  Full deduction of input VAT that is directly or proportionally related to participation management.
• Ancillary Activities Allowed (< 10%):
  Allows for deduction, but relies on a flat-rate correction scheme for these costs.
• Second Main Function (> 10%):
  The status of a pure holding is lost; the deduction of VAT must be made entirely according to standard allocation rules, and participation management cannot be separately deductible.

“3-Pot Methodology”

The ESTV employs a three-part allocation methodology (“3-pot method”) to distribute input VAT across different usage categories, based on the ratio of cost consumption between:

• Holding/managing/selling participations,
• Ancillary activities (financial/property),
• Other commercial activities.

Summary Points

• Clear Distinction: Input VAT can only be fully deducted if participation management is the sole main function.
• 10% Threshold: Activities exceeding this threshold fall outside the holding context, leading to undesirable consequences.
• Flat-rate Correction Schemes: Possible for limited ancillary activities.

This new VAT Info 09, formally published since autumn 2025, clarifies for directors and tax advisors how the treatment of input VAT differs depending on the activity structure of holding companies.

Source

• Bratschi
• SwissVAT

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