international tax blog
On January 12, 2017, the Court of Justice of the European Union (CJEU) ruled that tax authorities can deny VAT deductions on services procured by a holding company that does not impose a service charge on its subsidiaries.
Facts and Decision
MVM is a Hungarian state-owned energy company that deducted input VAT with respect to the services it procured. MVM provided some of these services to its subsidiaries, but did not impose a recharge, nor did it impose a general strategic management charge. Furthermore, neither MVM nor its subsidiaries were included in a VAT group.
MVM is a Hungarian state-owned energy company that deducted input VAT with respect to the services it procured. MVM provided some of these services to its subsidiaries, but did not impose a recharge, nor did it impose a general strategic management charge. Furthermore, neither MVM nor its subsidiaries were included in a VAT group.
The Hungarian tax authorities denied MVM a VAT deduction on the services that it procured in the interests of its subsidiaries or in connection with certain share acquisitions. MVM contested this decision. Ultimately, the Hungarian Supreme Court referred the appropriate treatment of the services to the CJEU, in light of the general rule that input VAT recovery requires a direct and immediate link between input transactions and taxable output transactions.
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