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The CJEU recently rendered its judgment (16 July 2015) in the joined cases Larentia + Minerva and Marenave Schiffahrts concerning the VAT deduction position of holding companies. It also answered the question of whether entities without ‘legal personality” can be included as part of a VAT group.
With respect to the input VAT deduction, the CJEU in its decision drew a distinction based on whether the holding company is actively involved in the management of its subsidiaries or not. It has been confirmed that active holding companies should have the right to fully reclaim the input costs incurred in relation to the acquisition of shares in those subsidiaries. On the other hand, mixed holding companies have to determine the calculation method for the deduction of their input VAT costs as the apportionment between economic and non-economic activities will be required.
EU states have different interpretations. The CJEU is very much in line with some member states, like the Netherlands and Belgium, but in some member states (Germany and the United Kingdom, for example) the judgment may have a considerable impact on holding companies.
Businesses with holding companies based in the EU should carefully review their corporate organization and monitor closely the changes that may be adopted in the various EU Member States.
Active holding companies having been prevented by tax authorities in the EU to deduct in full their input VAT costs in the past should assess the possibility of launching proceedings to reclaim this input VAT in accordance with the conditions for such proceeding imposed by national law.
Mixed holding companies should carefully analyse the impact of this decision, especially in respect of their past entitlement to deduct input VAT. In this case, it is crucial to evaluate the possible solutions to mitigate any risks especially for the past and to determine the method for the apportionment of the input VAT deduction of the holding company for the future.
VAT legislation can be fraught with risk; it’s advisable to consult with local experts in cases of ambiguity or uncertainty