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.

Michel Guichard

Michel Guichard, Partner, leads the Indirect Tax activity. With more than 30 years’ experience in International and French Tax law, he advises his clients on indirect tax matters. Michel is […]

Odile Courjon

Odile Courjon, Partner, has developed a strong expertise in indirect tax issues (VAT, wage taxes, excise taxes, export control and customs) in France and overseas. She advises her clients in […]

Bertrand Jeannin

Bertrand Jeannin, Partner, supplies strategic and technical advice to French and foreign multinational groups in all aspects of their VAT and customs policies. Major focuses of Bertrand’s input involve the […]

William Stemmer

William Stemmer, Partner, has more than 15 years’ experience in Indirect Tax matters. William particularly specializes in the real estate and financial sectors. William is a lecturer at the University […]

Anne Gerometta

Anne, Director, has been advising companies on indirect tax issues for more than 15 years. Anne has developed a specific expertise on the manufacturing sector (VAT, customs and Export Control) […]