Arnhem Court of Appeal concludes that a newly established holding company is not (yet) entitled to deduct VAT.
The case concerns a private limited company (BV) incorporated in 2018. The BV purchases all share certificates from another BV (the shares are owned by a trust company), which in turn holds shares in three other BVs. The private limited company claims a deduction for all VAT charged to it in 2018. The Tax and Customs Administration has levied this VAT retrospectively.
The Court finds that the BV carried out the following activities in 2018:
- lending funds to its (subsidiary) companies;
- active management of the (small) subsidiaries.
Loans
According to the Court, the lending of funds, in return for a fee in the form of interest, constitutes a supply in the course of economic activity. The private limited company therefore qualifies as a trader for VAT purposes. However, the lending of money is a VAT-exempt supply, from which no right to deduct VAT can be derived. The Court considers that the fact that the private limited company is not a bank does not alter this. This VAT exemption relates to the nature of the supply (the lending of money) and not to the status of the business making the supply.
(Future) management services
The fact that the BV provided management services in 2018 is not in dispute in these proceedings. However, the management agreement was not signed until 2021. In 2018, the private limited company did not issue any invoices for the management services (the company argues that this was because the (small) subsidiary companies were not – yet – able to pay the management fee). The Court therefore concludes that there were no (taxable) economic activities, meaning that no right to deduct VAT can be derived from these services either.
The private limited company also invokes case law which stipulates that VAT may be claimed as a deduction even during the period in which VAT-taxable activities are being set up. However, the Court of Appeal ruled that the private limited company had already commenced the (management) services but had not yet received any remuneration for them. According to the Court of Appeal, therefore, there is no question of the commencement of future activities.