The case revolves around the input tax deduction of a holding company for services provided as shareholder contributions. The holding company, engaged in taxable services, had subsidiaries that carried out exempt activities. The court ruled that the holding company is not entitled to deduct input tax for services that are not directly related to its taxable services but rather to the exempt activities of its subsidiaries. Additionally, the services provided as shareholder contributions are not considered part of the holding company’s general cost elements. The lower court’s decision in favor of the holding company was overturned, and the costs of the proceedings were imposed on the holding company. The case was referred to the European Court of Justice (ECJ), which confirmed that the holding company cannot claim input tax deduction for services related to the exempt activities of its subsidiaries.
The court decides:
1. The conditions for input tax deduction according to § 15 (1) sentence 1 no. 1 UStG (German Value Added Tax Act) are not fulfilled. Although the plaintiff is engaged in business activities, the disputed input services were not performed for her company.
2. A holding company whose sole purpose is to acquire shareholdings in other companies, without directly or indirectly interfering in the management of these companies, is not considered a taxable person within the meaning of Article 9 of the VAT Directive and is therefore not entitled to input tax deduction. However, if the financial participation in another company is accompanied by direct or indirect intervention in the management of the subsidiary, the input services provided by the holding company for the subsidiary constitute economic activities within the scope of the VAT Directive and may be subject to VAT. In this case, the holding company is entitled to input tax deduction.
3. In this case, the input services provided by the plaintiff as a shareholder contribution do not qualify as part of her business activities. These services are directly and immediately related to the taxable activities of the subsidiary companies and do not form part of the plaintiff’s general expenses for her business activities. Therefore, the input tax deduction for these services is not allowed.
4. The arguments raised by the plaintiff do not justify a different conclusion. The decisions of the European Court of Justice (ECJ) in the cases Larentia + Minerva and Marenave Schifffahrt are not applicable in this case, as they involve different circumstances. The ECJ has clarified that expenses related to the activities of a third party do not entitle a taxable person to claim input tax deduction, regardless of whether the activities of the third party are subject to VAT or not.
5. The question of whether the plaintiff’s actions would be considered abusive by establishing a holding company is no longer relevant to the decision.
Source: bundesfinanzhof.de
