Deloitte Société d'Avocats

Involvement of a holding company in the management of its subsidiaries

The holding company “MVM”, responsible for the management of the group formed with its subsidiaries, has purchased on several occasions various services (legal, management, public relations services) supplied either to itself, in the context of its rental activity subject to VAT, or to the entire group and finally, to some of its subsidiaries. The holding company has recovered VAT on all of these transactions.

The CJEU considers that, insofar as the holding company has not recharged the price of the services used in the interest of the entire group or used by some of its subsidiaries, the involvement of the holding company in the management of its subsidiaries does not constitute an “economic activity” under the VAT Directive.

In these circumstances, the holding company cannot recover input VAT paid for these services, because these services relate to operations outside the scope of VAT. This solution is applicable even though the holding company also performed an “economic activity” (rental activity). The Court applies, in this order, the general VAT principles, whose implementation can nevertheless cause practical difficulties within groups where it is not possible to recharge all supplies of services involving subsidiaries.