Value added tax – Parent company of the group – Right to deduct – Allocation of the right to deduct – General expenses – Financial and insurance services for group companies

A Oy acted as the group’s parent company and it provided various VAT expert and administrative services to the group companies it owned. A Oy was also responsible for organizing the financing of the entire group by granting loans to group companies or offering them short-term financing through the group account system. A Oy charged interest on the financing it granted to group companies. In addition, A Oy had taken out insurance covering the entire group, the insurance premiums of which it still billed to the group companies.

The Supreme Administrative Court considered that the services related to arranging financing and insurance provided by A Oy to group companies were not so closely related to the VAT expert and administrative services provided by the company that they would have formed a single indivisible financial performance. A Oy had to be considered to provide several separate services to group companies, the VAT treatment of which was determined independently.

When A Oy arranged financing for group companies by granting them credit or by offering short-term financing through the group account system, the question was about financial services exempted from VAT regarding lending referred to in § 41 and § 42, subsection 1, point 2 of the VAT Act. The insurance service, on the other hand, was an insurance service exempted from VAT as referred to in Section 44, subsection 1 of the VAT Act.

A Oy’s tax-exempt lending and arranging of insurance for group companies, considered as sales of financial and insurance services, had to be taken into account when determining the scope of the company’s right to deduct VAT. Thus, the company could not fully deduct the value added tax included in the general expenses, as it demanded.

Preliminary decision of the Central Tax Board regarding value added taxation for the period 15 October 2021–31 December 2022.

Value Added Tax Act § 1 subsection 1 subsection 1, § 41, § 42 subsection 1 subsection 2, § 44 subsection 1, § 102 subsection 1 subsection 1 and subsection 2 and § 117
Council Directive 2006/112/EC on the common value added tax system Article 135 subsection 1 a and (b) and Article 173(1) and (2)(c)
Judgments of the Court of Justice in cases C-250/21, Szef Krajowej Administracji Skarbowej (ECLI:EU:C:2022:757), C-907/19, Q-GmbH (ECLI: EU:C:2021:237), C-249/17, Ryanair (ECLI:EU:C:2018:834), C-108/14 and C-109/14, Larentia + Minerva and Marenave Schiffahrt (ECLI:EU :C:2015:496), C-224/11, BGŻ Leasing (ECLI:EU:C:2013:15) and C-77/01, EDM (ECLI:EU:C:2004:243)