Spain: Spanish Central Administrative Court clarifies VAT recovery principles on acquisition costs for holding companies
In the case at hand, a mixed holding company acquired services corresponding to the acquisition of shares in subsidiaries. The holding company also rendered management services to those subsidiaries (mostly reinvoicing services rendered from third parties).
The Court acknowledged that the entity was a mixed holding company that did qualify as a VAT taxable person. In addition, referring to CJEU case-law, the Court held that a mixed holding company may deduct input VAT on costs that have a direct and immediate link with services subject to VAT, or that are taken into consideration when determining the value of services rendered that are subject to VAT.
In this case, as the holding company only reinvoiced the services received from third parties, and the costs related to the acquisition of shares were not taken into account for calculating the price for the services rendered to the subsidiaries, the Court confirmed that the related input VAT was not deductible.
It is also worth noting that the Court based its conclusion on the fact that the amount charged for services rendered was disproportionately low compared to the services received corresponding to the acquisition of shares.
This judgement qualifies as doctrine and is binding on the Tax Authorities. Consequently, businesses should carefully follow this judgment when assessing the amount of VAT that is recoverable on acquisition costs.