Keywords
Summary

Keywords

Tax provisions Harmonisation of laws Turnover taxes Common system of value added tax Deduction of input tax Taxable person carrying out both taxable and exempt transactions Tax on services acquired in order to effect a transfer of a totality of assets or part thereof Member State not regarding such a transfer as a supply of goods Right to deduct Conditions

(Council Directive 77/388, Arts 5(8) and 17(5))

Summary

$$Where a Member State has made use of the option in Article 5(8) of the Sixth Directive 77/388 on the harmonisation of the laws of the Member States relating to turnover taxes, so that the transfer of a totality of assets or part thereof is regarded as not being a supply of goods, the costs incurred by the transferor for services acquired in order to effect that transfer form part of that taxable person's overheads and thus in principle have a direct and immediate link with the whole of his economic activity. If, therefore, the transferor effects both transactions in respect of which value added tax is deductible and transactions in respect of which it is not, it follows from Article 17(5) of the Sixth Directive 77/388 that he may deduct only that proportion of the value added tax which is attributable to the former transactions. However, if the various services acquired by the transferor in order to effect the transfer have a direct and immediate link with a clearly defined part of his economic activities, so that the costs of those services form part of the overheads of that part of the business, and all the transactions relating to that part of the business are subject to value added tax, he may deduct all the value added tax charged on his costs of acquiring those services.

( see para 42 and operative part )