The question was to determine whether a Polish branch of a company established in Slovakia was entitled to recover the VAT incurred in Poland for the needs of the services supplied to its head office located in Slovakia, which performed VAT taxable transactions in Slovakia. To be noted that the Polish branch also performed, on an occasional basis, some taxable transactions in Poland. The Court held, on the basis of the principle of neutrality, that the VAT incurred in an EU member State A for the performance of VAT taxable transactions in the EU member State B is recoverable. In the case at hand, the Polish branch was therefore entitled to recover the VAT incurred in Poland for the performance of the services supplied to its foreign head office, regardless the fact that the purchases were made for the needs of VAT taxable transactions performed in another EU member State.
In France, this case law is quite important since it refutes the solution retained by the Administrative Court of Appeal of Versailles in the « Morgan Stanley » case, which rejected the recovery of the French input VAT incurred by a French branch of a UK company for the needs of services supplied to its foreign head office arguing that such services were out of the scope of VAT, without giving rise to the right to deduct VAT. The supreme French Court will rule on this issue soon as an appeal has been made.
