Recovery of VAT on costs related to a proposed, but not realized, sale of shares of a participation

The CJEU concluded that the purpose for which the shares are being sold, is decisive for the VAT recovery. This questions is especially relevant for holding companies, with non or limited taxable economic activities.

The general rule is that VAT can only be claimed if costs relate to a taxable economic activity. In this case a holding company received advisor fees for a proposed sale of shares of a participation. The purpose of this sale was to repay the loan of the bank/ultimate owner of the group.

Since the only purpose was to diminish the loan of the bank, there was no direct relation with the economic activities of the holding company. Therefor the CJEU decided that these activities fall outside the scope of VAT, meaning that the VAT charged on the advisor fees was not deductible. In addition the CJUE stated that the outcome would not have been different, had the sale of shares been successful.

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