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.

The case in short:

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.

What did the Advocate General say:

The Advocate General concluded the following:

  • Preparatory work for starting an economic activity and for ending that economic activity are both part of that economic activity. Therefore, if a holding company no longer carries on the economic activity it rendered prior to the sale of shares held indirectly in its sub-subsidiary (i.e., the supply of management services to that sub-subsidiary) following the sale of those shares, that sale of shares represents an economic activity;
  • VAT on costs incurred by a holding company in selling its shares held indirectly in a sub-subsidiary is non-deductible if there is a direct and immediate link between those costs and the intention to sell those shares (i.e. a VAT exempt without credit transaction), even if the holding company supplies taxable services to its sub-subsidiary;
  • VAT on such costs may be deductible, only if there is no direct and immediate link between those costs and the intention to sell the shares, namely if there is a link between those costs and the entire economic activity of the holding company (which also includes taxable activities).

(Source: Advocate General’s Opinion in case C-502/17 C&D Foods Acquisition ApS against Skatteministeriet – Expenditure incurred for services purchased in connection with the planned transfer of shares in a subsidiary, published on website, on 6 September 2018).


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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