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Wednesday, 18 July 2018

VAT deduction and active holdings: EU case law widens the scope

VAT team

On July 5, 2018 the Court of Justice of the European Union delivered a new and welcome judgment about input VAT recovery by holding companies (ECJ, Marle Participations SARL, C-320/17, click here).

In a previous newsletter (click here) we discussed the opportunity for a holding company to deduct input VAT over expenses connected with the acquisition of shares in subsidiaries. Input VAT recovery is possible to the extent that the holding company:

  • is involved in the management of its subsidiaries; and
  • provides VAT taxable services for consideration.1

However, uncertainty remained about the definition of “involvement” and services that could qualify as such. In particular, the question was raised if the holding company should actually “manage” the subsidiary or whether it is sufficient that the holding company supplies a VAT taxable service to the subsidiary.


Decision in the Marle case

The Court has used the opportunity presented by the Marle case to further elaborate on this topic. Marle Participations SARL is the French holding company of the Marle group. It holds shareholdings in the members and, additionally, it lets immovable property to the subsidiaries. The rental agreements were all subject to VAT. As a consequence, Marle Participations SARL took the view that it could deduct all input VAT in connection with the costs for the acquisition of these subsidiaries. The French tax administration took a different view and decided that Marle Participations SARL remained a passive holding. As a consequence, the input VAT recovery was denied.

The question about whether the letting of a building to a subsidiary qualified as sufficient involvement in the management of this subsidiary was referred to the Court of Justice of the EU. In its short and clear judgment the Court has ruled out that the term “involvement of a holding company in the management of its subsidiary” covers all transactions constituting an economic activity, within the meaning of the VAT Directive, performed by the holding company for the benefit of its subsidiary. Therefore, a VAT taxable letting of immovable property is sufficient for the holding company to deduct input VAT over acquisition costs.

Please note that in this case the letting of immovable property was a VAT taxable transaction (an activity which in Belgium is currently VAT exempt). If the immovable rental agreements are VAT exempt, of course, then no input VAT recovery is possible.



This judgment is important as it makes clear that any VAT taxable service for consideration supplied by the holding company to the subsidiary on a continuous basis should be sufficient to claim a full input VAT recovery on the acquisition costs and, in our view, on all overhead costs. For example, this could also cover consultancy services, accounting services or other services supplied by the holding company to its subsidiaries.

For any question on this topic, please contact the Tiberghien VAT team:

Stijn Vastmans - Head of VAT (
Stein De Maeijer - Senior Associate (
Loulou Geboers - Associate (
Marouschka Gunzburg - Associate (
NIls Vanhassel - Associate (
Gert Vranckx - Associate (


1 see also CJEU order C‑28/16, 12.01.2017, MVM (click here).

VAT team

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