Keywords
Summary

Keywords

Tax provisions - Harmonisation of laws - Turnover taxes - Common system of value added tax - Deduction of input tax - Undertaking subject to tax on only one part of its operations - Deductible proportion - Calculation - Receipt by holding company involved in the management of its subsidiaries of share dividends from those subsidiaries - Excluded from denominator - Receipt of loan interest - Excluded from denominator - Condition

(Council Directive 77/388, Arts 4(2) and 19)

Summary

$$Under Article 19 of the Sixth Directive 77/388 on the harmonisation of the laws of the Member States relating to turnover taxes, an undertaking which is not subject to value added tax in respect of all its operations may deduct from the tax for which it is liable the tax which it has paid not exceeding a deductible proportion, which is made up of a fraction having as denominator the total amount of turnover attributable to transactions in respect of which value added tax is deductible and to transactions in respect of which it is not deductible. That provision must be interpreted as meaning that the following must be excluded from the denominator: first, share dividends paid by its subsidiaries to a holding company which is a taxable person in respect of other activities and which supplies management services to those subsidiaries, since, as the receipt of dividends is not the consideration for any economic activity, it does not fall within the scope of value added tax; second, interest paid by the subsidiaries to the holding company on loans it has made to them, where the loan transactions do not constitute, for the purposes of Article 4(2) of the Sixth Directive, an economic activity of the holding company.

( see paras 21, 32 and operative part )