Morgan Stanley – Preliminary Questions

In a decision dated 29 March 2017, the French Conseil d’Etat referred the following preliminary questions to the CJEU:


  1. In the event that costs incurred by a branch established in a Member State are exclusively allocated to operations carried out by its head office established in another Member State, are the provisions of articles 17, paragraphs 2, 3 and 5, and 19, paragraph 1 of the Sixth Directive 77/388/EEC, referred to in articles 168, 169 and 173 to 175 of the 2006/112/EC Directive to be interpreted as meaning that the Member state of the branch shall apply to these costs the deductible proportion of the branch, determined on the basis of the operations carried out in its VAT registration state and of the rules applicable in that same State, or the deductible proportion of the head office, or even a specific deductible proportion combining the rules applicable in the VAT registration states of the branch and the head office, in particular regarding the possible existence of a VAT option scheme allowing to render the operations subject to VAT?
  2. Which rules should apply in the particular case where the costs incurred by the branch contribute to the carrying out of operations in its VAT registration state and to those of the head office, in particular regarding the concept of overhead costs and the deduction proportion?

Article written with the participation of Emilie Dufour

William Stemmer

William Stemmer, Partner, has more than 20 years’ experience in Indirect Tax matters. William particularly specializes in the real estate sector. William carries out many training courses on VAT aspects […]