The European Court of Justice recently ruled on the question of whether there is also a question of “active interference” when a holding company only rents a building to its subsidiaries, without also providing management services. The Court confirms that for there to be a question of “active interference”, there must be a permanent “economic activity”, carried out against payment and subject to VAT. The VAT directive also considers as an economic activity “any activity of producer, trader or provider of services and, in particular, the exploitation of a tangible or intangible good with a view to obtaining income from it having a permanent character.”
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Based on the judgment of the European Court, the choice to charge VAT on the rental of real estate would therefore have the consequence that your holding company becomes “active” and can therefore recover the VAT paid. Since any exploitation of a tangible or intangible asset is considered an “economic activity”, the rental of real estate and the provision of intellectual property rights are in principle also sufficient to make your holding an active holding. As it results from the judgment that any activity subject to VAT can make a holding company active and as the management fees are subject to VAT, one could infer that it is sufficient to make your holding the (paid) administrator of the operating companies. However, this type of deduction must always be verified in practice, because administrative practice is often still based on older and more stringent views.
When preparing for an acquisition, you are generally faced with significant costs for various advice (due diligence, tax advice, legal advice, support for the acquisition, etc.). A large part of these costs must also be paid when the acquisition ultimately does not take place. To what extent can you recover the imputed VAT in this case?
According to the case law of the European Court of Justice, preparatory activities must already be attributed to economic activity. When a company intends, confirmed by objective evidence, to independently start an economic activity and already makes the first investment expenditure for this purpose, it must be considered as liable. It follows that a company which performs preparatory acts which are part of a project to acquire shares of another company with the intention of carrying on an economic activity consisting of interfering in the management of the latter by providing it with management services subject to VAT must be considered as subject. In such situations you can make use of the self employment tax calculator in all the options.
The acquisition does not take place?
The company can also recover the VAT if the envisaged activity has not seen the light of day and therefore has not given rise to taxable transactions. This is also the case when the taxable person was ultimately unable to use the goods or services which gave rise to the recovery of VAT due to circumstances beyond his control.
VAT is also recoverable when there is no direct and immediate link between a specific transaction and transactions carried out at a more or less later stage for which there is a right of deduction. In principle, it is sufficient that the costs are directly and immediately linked to the activity of the taxable person as a whole. Even when a planned acquisition does not take place, VAT on consultancy services is therefore in principle recoverable, if you can prove that you intended to actively interfere in the management of the target company and to provide in this framework of management services subject to VAT.