Germany: VAT deduction for holding companies (CJEU judgment)

Germany: VAT deduction for holding companies

The Court of Justice of the European Union (CJEU) issued a judgment concerning the value added tax (VAT) deduction position of holding companies and the conditions for a VAT group. The CJEU concluded that:


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  • Concerning the VAT deduction position of holding companies—a holding company that is actively involved in the management of its participation and that performs VAT-able services for a fee is entitled to deduct the VAT on acquisition costs.
  • Concerning the VAT group—entities without ‘legal personality” can be included as part of a VAT group.

The judgment was entered in joined cases Larentia + Minerva and Marenave Schiffahrts on 16 July 2015.


In the first case, the taxpayer was an entity without “legal personality” under German law (a partnership). The taxpayer held two participations, for which it provided administrative and commercial services. The participations operated full container ships. In order to acquire several new participations, the taxpayer incurred costs on which VAT was charged (approximately €760,000), while the turnover of the VAT-able services was considerably less than this amount in the first year.

The facts in the second case are similar. The taxpayer incurred costs for a share issue, and VAT of more than €373,000. In the year in question, the taxpayer received a small fee for the management services it provided to its participations.

Both taxpayers deducted the VAT charged on the costs related to the acquisition of the participations and the share flotation. In both cases, the German tax authorities denied part of the VAT deduction because these costs were considered to be related to the procurement of capital and to the share flotation as partly attributable to the “non-economic activities” of the holding company, i.e., the holding of shares.

The German courts referred the matters to the CJEU for a preliminary finding concerning:

  • Whether the taxpayers could deduct the amount of VAT charged on the costs incurred on the procurement of capital and on the share flotation?
  • Whether entities without legal personality can be included in a VAT group?
  • Whether a taxable person may directly invoke the VAT group provision of the VAT Directive?

Read a July 2015 report prepared by the KPMG member firm in the Netherlands: Court of Justice of the European Union confirms earlier case law: full VAT deduction for active holding companies

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