“1. ‘Taxable person’ shall mean any person who, independently, carries out in any place any economic activity, whatever the purpose or results of that activity.”
“(1) Subject to the following provisions of this section, ‘input tax’, in relation to a taxable person, means the following tax, that is to say – (a) VAT on the supply to him of any goods or services; and … being (in each case) goods or services used or to be used for the purpose of any business carried on or to be carried on by him. (2) Subject to the following provisions of this section, ‘output tax’, in relation to a taxable person, means VAT on supplies which he makes. …”
“6.
“33.By the disposal of all of its shares in the subsidiary and in the controlled company, SKF brought to an end its holdings in those companies. That disposal, carried out in order to enable the parent company to restructure a group of companies, can be regarded as a transaction that consists in obtaining income on a continuing basis from activities which go beyond the compass of the simple sale of shares (see, to that effect, Kretztechnik AG v Finanzamt Linz (Case C-465/03 )[2005] STC 1118 ,[2005] 1 WLR 3755 , para 20 and the case law there cited). That transaction has a direct link with the organisation of the activity carried out by the group and constitutes accordingly the direct, permanent and necessary extension of the taxable activity of the taxable person within the terms of the case law cited in para 31 of this judgment. Such a transaction consequently comes within the scope of VAT.”
“64. In order to give a useful answer to the referring court, it must be recalled that the court has held, on numerous occasions, that there is a right to deduct VAT paid on consultancy services used for the purposes of various financial transactions, on the ground that those services were directly attributable to the economic activities of the taxable persons (see, inter alia, Midland Bank (para 31); Abbey National (paras 35 and 36); CiboParticipations (paras 33and 35) Kretztechnik (para 36); and Securenta (paras 29 and 31)). 65. Admittedly, the output transactions in shares in the cases which led to the above-mentioned judgments, unlike those in the main proceedings in the present case, were outside the scope of VAT. However, as is clear from the case law cited in paras 28 and 30 of this judgment, the main factor distinguishing the legal classification of those transactions from that of transactions which come within the scope of VAT but are exempt from it is whether the company which is liable to the tax is or is not involved in the management of the companies in which a shareholding has been taken. 66. However, if the right to deduct input VAT paid on consultancy costs relating to a disposal of shares which is exempted because of involvement in the management of the company whose shares are sold was not allowed, and if the right to deduct input VAT in respect of such costs relating to a disposal which is outside the scope of VAT was allowed on the ground that those costs constitute general costs of the taxable person, that would amount to treating objectively similar transactions differently for tax purposes, and would be an infringement of the principle of fiscal neutrality. 67. In that regard, the court has ruled that the principle of fiscal neutrality, which is a fundamental principle of the common system of VAT, precludes treating similar supplies of services, which are thus in competition with each other, differently for VAT purposes (see, inter alia, Kingscrest Associates Ltd v Customs and Excise Comrs (Case C-498/03 )[2005] STC 1547 ,[2005] ECR I-4427 , para 41; Turn-und Sportunion Waldburg v Finanzlandesdirektion für Oberösterreich (Case C-246/04 )[2006] STC 1506 ,[2006] ECR I-589 , para 33; and R (on the application of Teleos plc) v Revenue and Customs Comrs (Case C-409/04 )[2008] STC 706 ,[2008] QB 600 , para 59) and, further, precludes economic operators who carry out the same activities from being treated differently as far as the levying of VAT is concerned (see, inter alia, Gregg v Customs and Excise Comrs (Case C-216/97 )[1999] STC 934 ,[1999] ECR I-4947 , para 20, and Revenue and Customs Comrs v Isle of Wight Council (Case C-288/07 )[2008] STC 2964 ,[2008] ECR I-7203 , para 42). 68. It follows that, if the consultancy costs relating to disposals of shareholdings are considered to form part of the taxable person's general costs in cases where the disposal itself is outside the scope of VAT, the same tax treatment must be allowed if the disposal is classified as an exempted transaction. 69. That interpretation is borne out by the purpose of the common system introduced by the Sixth Directive, which is, in particular, to secure equal treatment for taxable persons (see, inter alia, Muys' en de Winter's Bouw-en Aannemingsbedrijf BV v Staatssecretaris van Financiën (Case C-281/91 ) [1997] STC[1993] ECR I-5405 , para 14). That principle would be disregarded if the costs incurred by a parent company managing a group of companies in connection with a sale of shares which is part of its economic activity were to be taxable, while a holding company which carries out the same transaction outside the scope of VAT would be entitled to deduct VAT paid on the same costs by reason of the fact that those costs form part of the general costs of its overall economic activity.”
'22. In the present case, the referring court has described the expenses relating to the capital goods at issue in the main proceedings as being ultimately intended for carrying out the economic activities planned by Sveda. According to that court's findings, supported by objective evidence from the file it submitted, the recreational path concerned may be regarded as a means of attracting visitors with a view to providing them with goods and services, such as souvenirs, food and drinks as well as access to attractions and paid-for bathing. 23. Therefore, it would appear from those findings that Sveda acquired or produced the capital goods concerned with the intention, confirmed by objective evidence, of carrying out an economic activity and did, consequently, act as a taxable person within the meaning of art 9(1) of the VAT Directive. … 29. It is apparent from the case law of the court that, in the context of the direct-link test that is to be applied by the tax authorities and national courts, they should consider all the circumstances surrounding the transactions concerned and take account only of the transactions which are objectively linked to the taxable person's taxable activity. The existence of such a link must thus be assessed in the light of the objective content of the transaction in question (see, to that effect, judgment in Finanzamt Köln-Nord v Becker (Case C-104/12 ) (21 February 2013 , unreported), paras 22, 23 and 33 and the case law cited). 30. The findings of the referring court establish that, in the case in the main proceedings, the expenditure incurred by Sveda as part of the construction work on the recreational path should come partly within the price of the goods or services provided in the context of its planned economic activity. 31. The referring court nevertheless harbours doubts as to whether there is a direct and immediate link between the input transactions and Sveda's planned economic activity as a whole, owing to the fact that the capital goods concerned are directly intended for use by the public free of charge. 32. In that regard, the case law of the court makes it clear that, where goods or services acquired by a taxable person are used for purposes of transactions that are exempt or do not fall within the scope of VAT, no output tax can be collected or input tax deducted (judgment in [Eon Aset Menidjmunt OOD v Direktor na Direktsia '
“[47] It seems to me that the CJEU has clearly moved away in these recent decisions from any disregard of the ultimate economic purpose of the relevantexpenditure in considering whether it should be treated as linked to the taxpayer's wider economic activities. This is not a question of subjective intent but requires an objective analysis in terms of the taxpayer's identifiable economic activities of why the input supplies were acquired. Although there must, I think, be some evidence that the cost of the input supplies was passed on as part of the cost of the supplies which the taxable person subsequently makes, the absorption of those costs as part of the expenditure of running the business is not to be ignored merely because they also facilitated the making of supplies which in themselves were either exempt or outside the scope of the PVD.”
“(iii) Summary of the case law [65] I derive the following propositions which are relevant to this appeal from the case law: (i) As VAT is a tax on the value added by the taxable person, the VAT system relieves the taxable person of the burden of VAT payable or paid in the course of that person’s economic activity and thus avoids double taxation. This is the principle of deduction set out in article 1(2) and operated in article 168 of the PVD and vouched, for example, in Rompelman v Minister van Financiën (Case C-268/83 )[1985] ECR 655, para 19; Abbey National[2001] 1 WLR 769 , para24; Kretztechnik[2005] 1 WLR 3755 , para 34 and SKF[2010] STC 419 , paras 55—56. (ii) There must be a direct and immediate link between the goods and services which the taxable person has acquired (in other words the particular input transaction) and the taxable supplies which that person makes (in other words its particular output transaction or transactions). This link gives rise to the right to deduct. The needed link exists if the acquired goods and services are part of the cost components of that person’s taxable transactions which utilise those goods and services: see for example Midland Bank[2000] 1 WLR 2080 , paras 24 and 30; Abbey National, para 28; Kretztechnik, para 35; Securenta [2008]STC 3473, para 27; SKF, para 57 and Revenue and Customs Comrs v University of Cambridge EU:C:2019:559, para 31. (iii) Alternatively, there must be a direct and immediate link between those acquired goods and services and the whole of the taxable person’s economic activity because their cost forms part of that business’s overheads and thus a component part of the price of its products: see for example BLP[1996] 1 WLR 174 , para 25; Midland Bank, para 31; Abbey National, paras 35 and 36; Kretztechnik, para 36; SKF, para 58 and University of Cambridge, para 31. (iv) Where the taxable person acquires professional services for an initial fund-raising transaction which is outside the scope of VAT, that use of the services does not prevent it from deducting the VAT payable on those services as input tax and retaining that deduction if its purpose in fund-raising, objectively ascertained, was to fund its economic activity and it later uses the funds raised to develop its business of providing taxable supplies. See, for example, Abbey National, paras 34—36; Kretztechnik, paras 36—38; Securenta, paras 27—29 and SKF, para 64. The same may apply if an analogous transaction involving the sale of shares is classified as an exempt transaction: SKF, para 68. (v) Where the cost of the acquired services, including services relating to fund-raising, are a cost component of downstream activities of the taxable person which are either exempt transactions or transactions outside the scope of VAT, the VAT paid on such services is not deductible as input tax. See for example Securenta, paras 29 and 31; SKF, paras 58—60 and Sveda[2016] STC 447 , para 32. Where the taxable person carries on taxable transactions, exempt transactions and transactions outside the scope of VAT, the VAT paid on the services it has acquired has to be apportioned under article 173 of the PVD. (vi) The right to deduct VAT as input tax arises immediately when the deductible tax becomes chargeable: article 167 of the PVD, Securenta, paras 24 and 30 and SKF, para55. As a result, there may be a time lapse between the deduction of the input tax and the use of the acquired goods or services in an output transaction, as occurred in Sveda. Further, if the taxable person acquired the goods and services for its economic activity but, as a result of circumstances beyond its control, it is unable to use them in the context of taxable transactions, the taxable person retains its entitlement to deduct: Midland Bank, paras 22 and 23. (vii) The purpose of the taxable person in carrying out the fund-raising is a question of fact which the court determines by having regard to objective evidence. The CJEU states that the existence of a link between the fund-raising transaction and the person’s taxable activity is to be assessed in the light of the objective content of the transaction: Sveda, para 29; Iberdrola [2017] BVC 39, para 31. The ultimate question is whether the taxable person is acting as such for the purposes of an economic activity. This is a question of fact which must be assessed in the light of all the circumstances of the case, including the nature of the asset concerned and the period between its acquisition and its use for the purposes of the taxable person’s economic activity: Eon Aset Menidjmunt OOD v Direktor na Direktsia “Obzhalvane i upravlenie na izpalnenieto” - Varna pri Tsentralno upravlenie na Natsionalnata agentsia za prihodite (Case C-118/11 )[2012] STC 982 , para 58; Klub OOD v Direktor na Direktsia “Obzhalvane i upravlenie na izpalnenieto” - Varna pri Tsentralno upravlenie na Natsionalnata agentsia za prihodite (Case C-153/11 ) [2012 ]STC 1129, paras 40—41 and a, para 21.”
“60 It follows that whether there is a right to deduct is determined by the nature of the output transactions to which the input transactions are assigned. Accordingly, there is a right to deduct when the input transaction subject to VAT has a direct and immediate link with one or more output transactions giving rise to the right to deduct. If that is not the case, it is necessary to examine whether the costs incurred to acquire the input goods or services are part of the general costs linked to the taxable person’s overall economic activity. In either case, whether there is a direct and immediate link will depend on whether the cost of the input services is incorporated either in the cost of particular output transactions or in the cost of goods or services supplied by the taxable person as part of his economic activities.” (Emphasis added)
“61 In the present case, the referring court describes the costs linked to the services acquired by SKF, first, as ‘directly attributable’ to the disposal of shares and, second, as forming part of the general costs associated with SKF’s overall economic activities. 62 In that regard, it must be held that it is not possible from the case-file submitted to the Court to determine whether those costs have a direct and immediate link, within the meaning of the case-law cited in paragraphs 57 and 58 of this judgment, with the envisaged share disposals or with SKF’s overall economic activity, given that, according to the referring court, the purpose of those transactions was to secure funds to finance other activities of the group. In order to establish whether there is such a direct and immediate link, it is necessary to ascertain whether the costs incurred are likely to be incorporated in the prices of the shares which SKF intends to sell or whether they are only among the cost components of SKF’s products.”
“The CJEU has clearly moved away in these recent decisions from any disregard of the ultimate economic purpose of the relevantexpenditure in considering whether it should be treated as linked to the taxpayer's wider economic activities.”
“[42] In his opinion, Advocate General Mengozzi endorsed the distinction which Advocate General Jacobs made in Abbey National between the chain-breaking effect of an exempt transaction and the absence of such an effect where the fund-raising transaction is outside the scope of VAT (paras 69 and 79). He opined (para 89(3)) that where the taxable person acquires supplies of services in order to carry out a share disposal which is an exempt transaction, he does not have the right to deduct input VAT on those services, even when the disposal of shares is a transaction which contributes to the restructuring of the taxable person's industrial activities.”
“[43] The CJEU disagreed with his conclusion in relation to an exempt transaction involving a sale of shares in circumstances which were analogous to the facts of the case and held (para 73) that there was a right to deduct input VAT paid on services acquired for the purposes of a disposal of shares 'if there is a direct and immediate link between the costs associated with the input services and the overall economic activities of the taxable person'. It held that the referring court should take account of all the circumstances surrounding the transactions to determine whether the costs incurred were likely to be incorporated in the price of the shares sold or whether they were among only the cost components of transactions within the scope of the taxable person's economic activities.”