Keywords
Summary

Keywords

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Tax provisions ° Harmonization of laws ° Turnover tax ° Common system of value added tax ° Deduction of input tax ° Undertaking liable to VAT solely in respect of part of its transactions ° Pro rata deduction ° Calculation ° Receipt of share dividends ° Excluded

(Council Directive 77/388, Art. 19(1))

Summary

By virtue of Article 19(1) of the Sixth Directive 77/388/EEC on the harmonization of the laws of the Member States relating to turnover taxes, an undertaking which is not subject to VAT in respect of the whole of its transactions may deduct, from the VAT which it is liable to pay, a proportion of the amount of VAT which it has paid up corresponding to a fraction having, as denominator, the total amount of turnover attributable to transactions in respect of which value added tax is deductible and transactions in respect of which value added tax is not deductible. That provision must be interpreted as meaning that share dividends received by such an undertaking are to be excluded from the denominator. Since the receipt of dividends is not the consideration for any economic activity within the meaning of the Sixth Directive, it does not fall within the scope of value added tax, so that dividends resulting from holdings fall outside the deduction entitlement.