Garrigues, Taxand Spain, explains a court judgement on the sale of shares.
The controlling company of a group engaged in construction which carried on strategic planning activities and provided loans together with corporate services to its subsidiaries, sold a few shares in subsidiaries.
The auditors considered that the activity of acquiring, holding and selling shares by that company amounted to an economic activity for VAT purposes, by being carried on with the assets of the business and for a business purpose, on a regular and permanent basis. Consequently, they considered that the transactions used to perform that activity were transactions subject to VAT which had to be included in the company’s financial activity sector. Based on this conclusion, they reassessed the input VAT paid on the performance of those activities, and reduced the shared deductible portion by including in the denominator the gains derived from the sale of shares in the subsidiaries.
TEAC (the Central Economic-Administrative Tribunal) confirmed this conclusion, highlighting the size and recurring nature of the transactions with shares bearing in mind for these purposes that several reorganisation transactions had been carried out (among them, the merger with a construction group).