Also in the news...
Protecting Business Reputation When Entering Foreign Markets
Expanding into new international markets presents promising growth opportunities. However, such moves come with challenges, especially when it comes to maintaining and protecting a business’s brand reputation.
Essential Steps When Moving Business Goods Across Borders
Shipping goods between countries brings up several obstacles for businesses. Customs rules and paperwork can differ significantly depending on the destination and the nature of the goods being shipped. Customs systems and documentation requirements vary across regions, making it necessary for companies to stay informed.
Sell to the world and grow your business
Compare international markets, create your export action plan and join the UK Export Academy for free training.
Maps of East Midlands Investment Zone tax sites
Find the Investment Zone tax sites within East Midlands Investment Zone.
CJEU Judgement Affects Vat Deduction Position Of Holding Companies
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