- A case in the Supreme Administrative Court concerning whether a parent company providing management services to its subsidiaries can deduct input VAT for costs related to the sale of shares in subsidiaries.
- The Tax Agency believed that a connection with an economic activity in a parent company cannot exist unless the capital obtained from the share divestment is reinvested in a taxable business towards external customers.
- The Court of Appeal in Gothenburg agreed with the Tax Agency, disallowing deduction for input VAT on the costs of carrying out the share disposal.
- The company appealed, and HFD examined whether a parent company providing VAT-liable services to subsidiaries has the right to deduct input VAT for costs incurred in connection with the sale of a subsidiary.
- HFD found that the costs may be deductible as they have a direct and immediate connection with the parent company’s economic activities, required for the right to deduction for input tax to exist.
- However, the issue of whether the deduction should be limited in terms of amount is referred back to the Court of Appeal for further consideration.
- The decision clarifies that the right to deduct input tax on disposal costs of shares also exists for parent companies that do not conduct active management.
Source KPMG
