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Advocate General supports greater VAT recovery for active holding companies
Following Advocate General Mengozzi’s opinion published yesterday in the case of Larentia+Minerva, which supported holding companies’ right to claim VAT, Taxand UK discusses how businesses with active holding companies may want to react.
Many EU member states have sought to block active holding companies from reclaiming VAT on services used in buying other companies, saying that the VAT is linked to non-business shareholding activities rather than to taxable supplies of management services.
AG Mengozzi has rejected that approach and supported active holdings companies being entitled to reclaim VAT on corporate acquisition costs, providing they make taxable supplies of management services.
The European Court is not obliged to follow AG Mengozzi’s opinion, but it is still a positive development that casts significant doubt on the current practice in many member states of preventing active holding companies from reclaiming VAT on corporate acquisition costs.
This will be welcome news to private equity investors and other businesses with active holding companies. In view of national time limits for reclaiming VAT, active holding companies which have not recovered VAT on corporate acquisition costs should consider protective claims pending the final CJEU judgment expected later this year.