Germany: Holding company has no right to recover VAT on services contributed to subsidiary

Court of Justice of the European Union (CJEU) judgment

Services contributed to subsidiary (CJEU judgment)

The Court of Justice of the European Union (CJEU) issued a judgment finding that a holding company that performs and purchases services subject to value added tax (VAT) that it subsequently contributes to its subsidiary has no right to recover the VAT on costs directly attributable to the contribution. 

The case is: W-GmbH no. C-98/21 (8 September 2022)


The taxpayer is a German property developer that owns 94% of the shares in a subsidiary. The entities do not form a VAT group. The subsidiary performs activities that are largely exempt from VAT.

The taxpayer contributed services worth €9.4 million to its subsidiary. Such services consisted of architectural services, static calculations, drawing up plans for heat and sound systems, energy supply and network connections, and general contracting activities for two buildings to be constructed by the subsidiary, as well as putting them up for sale on the market. To perform these services, the taxpayer used some of its own personnel or equipment and also purchased goods and services from other businesses.

CJEU judgment

The CJEU held that a contribution is comparable with the holding of shares and thus is not an economic activity. Moreover, the court found that there was a direct and immediate connection between the costs incurred for the contribution and the activities of the subsidiary, and therefore the costs could not be regarded as general overhead of the taxpayer. 

KPMG observation

According to tax professionals, the CJEU’s judgment was not surprising because the subsidiary would not have been able to recover the VAT if it had directly purchased the services contributed by the taxpayer, and the CJEU has held against taxpayers in other similar recent cases. Nonetheless, the CJEU’s apparent position that the holding of shares, and thus a contribution, can never constitute an economic activity seems unjustified.

Read a September 2022 report prepared by the KPMG member firm in the Netherlands


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