VAT deduction acquisition costs for holding company in case of letting to subsidiairy less clear

14/07/18

On July 5, 2018, the Court of Justice of the European Union (CJEU) decided in the Marle Partipations case that the letting of a building by a holding company to its subsidiary amounts to 'involvement in the management' of that subsidiary.

Due to the way of reasoning of the CJEU it is not clear what the consequences of this decision are for holding companies letting real estate to its subsidiaries.

VAT connected to acquistions

Expenditure connected with the acquisition of shareholdings in subsidiaries incurred by a holding company which involves itself in the subsidiaries’ management by letting them a building has to be regarded as belonging to its general expenditure and the VAT paid on that expenditure must, in principle, be capable of being deducted in full.

Expenditure connected with the acquisition of shareholdings in subsidiaries incurred by a holding company which involves itself in the management of only some of those subsidiaries and which, with regard to the others, does not, by contrast, carry out an economic activity must be regarded as only partially belonging to its general expenditure, so that the VAT paid on that expenditure may be deducted only in proportion to the expenditure which is inherent in the economic activity, in accordance with the (pre) apportionment criteria defined by the Member States.

What does it mean for you?

This decision is important for you acting as a holding company if you have paid or incurred costs relating to your individual shareholdings or for the group the holding company is belonging to.

Allocation of the costs to the various shareholdings might be important and must be considered carefully. In this respect we refer to former decisions of the CJEU.

If you have such a holding situation at hand, we recommend that you discuss the consequences of this recent CJEU decision on short notice.