- A Swedish referral asks whether input VAT deduction can be denied for cross-border B2B services that are exempt or not taxable in the customer’s Member State, even though they would be taxable if supplied domestically.
- The dispute centers on possible differences in how Member States apply the VAT exemption for management of special investment funds.
- The case may rest on a contested assumption that the services at issue are exempt in Luxembourg; if that assumption is wrong, the issue becomes more theoretical.
- Article 169(a) of the VAT Directive can be read literally as allowing deduction where the domestic counterfactual would be deductible, without requiring the output to be taxable in the actual place of supply.
- The Swedish Tax Agency relies on Morgan Stanley’s “twofold condition,” but that case may not be a perfect match because it involved a head office/branch situation rather than a pure cross-border exemption mismatch.
Source: dlapiper.com
See also
- Join the Linkedin Group on ECJ/CJEU/General Court VAT Cases, click HERE
- VATupdate.com – Your FREE source of information on ECJ VAT Cases
- Podcasts & briefing documents: VAT concepts explained through ECJ/CJEU cases on Spotify
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