- The Supreme Administrative Court ruled on a case regarding the right to deduct input VAT on the lease of premises made available free of charge to employees and persons cooperating with the company.
- The company argued that there is an indirect relationship between the purchased services and the company’s business activity, and consequently, activities subject to VAT.
- However, the Director of the National Tax Information and the Provincial Administrative Court did not share this position.
- Only the Supreme Administrative Court repealed the appealed judgment and interpretation, emphasizing that the incurrence of rental expenses for residential premises for employees and associates of the company is a condition for obtaining VAT-taxable turnover by securing the maintenance of the source of income.
- Therefore, there is an indirect connection with the taxed activity, and the company should be entitled to deduct the input tax related to these costs.
- The judgment strengthens the line of jurisprudence that expenses indirectly related to business activity can be the basis for deducting input tax if their incurrence is a condition for obtaining turnover subject to VAT.
Source MDDP
