The EU Court of Justice recently issued the Advocate General’s opinion in case C-502/17 C&D Foods Acquisition ApS. The opinion states that VAT applied on costs directly and immediately linked to the intention to sell shares is non-deductible.
A Danish company – C&D Foods Acquisition ApS – intended to sell the shares it held indirectly in a sub-subsidiary, to which the mother-company provided management services subject to tax. The Company acquired numerous services for assistance with the share sale transaction, for which it deducted input VAT. In the end, given that the Company failed to come to an agreement with any potential buyer, it cancelled all efforts to sell those shares. As a consequence, the Danish tax authorities rejected the Company’s right to deduct VAT on the services it acquired for assistance with the transaction.
The Advocate General concluded the following:
This opinion points out that taxable persons are not entitled to deduct VAT applied on costs with services necessary for the sale of shares, if there is a direct and immediate link between those costs and the intention to sell the shares.
If the EU Court follows the Advocate General’s opinion, the decision could be extended to all other similar VAT cases involving an intention to sell shares.
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