Marle Participations SARL is a French company that holds the shares in various subsidiaries and, in addition, lets real estate to (some of) these subsidiaries. The rent is based on VAT-taxed lease agreements. With respect to costs related to the acquisition of subsidiaries the question arises whether the VAT hereon becomes (fully) deductible.
Based on settled case-law of the ECJ, a holding company can deduct input VAT related to costs for acquiring shares if (i) it is involved in the management of these subsidiaries and (ii) it provides economic activities to these subsidiaries. In the Marle case the question is answered whether the lease of immovable property is considered a qualifying economic activity. The ECJ clearly states that all economic activities can form such involvement in the management.
Consequences for the Netherlands
The recovery of input VAT relating to the acquisition, holding and selling shares in subsidiaries is often subject to debate. Pursuant to EU case-law the Dutch tax authorities allow a recovery of input VAT for the acquisition, holding and disposal of shares in a (majority-stake) subsidiary, where the holding is actively involved in the management of the subsidiary and this management is accompanied with services subject to VAT. In this decision the ECJ explicitly confirms that the requirements for a holding company to deduct input VAT (being (i) involvement in the management and (ii) providing economic activities) should -in practice- be considered as one requirement. Consequently, a right to deduct input VAT exists for holding companies if and to the extent they provide economic activities to their subsidiaries.