Je rozsudek SDEU C-4/94 BLP Group
překonaný?

Is the CJEU judgment C-4/94 BLP Group outdated?

In the former BLP Group judgment, the CJEU considered the deductibility of services received by a holding company in connection with the sale of shares in a controlled company. The sale of the shares occurred because the group ran into financial difficulties and needed to repay a debt arising from the group's taxable activities. The CJEU refused the deduction on the grounds that the services in question were used for VAT-exempt supplies without the right to deduct and that its ultimate purspose (to continue its taxable activities) was irrelevant.

The UK Upper Tribunal has now dealt with a similar dispute in HOTEL LA TOUR LTD. HLT is an active holding company which provides management services to its daughters. For economic reasons, it decided to sell one of its companies in order to raise finance for the construction of a new hotel. HM Revenue and Customs (HMRC) disallowed the tax deduction, citing a BLP ruling. According to HMRC, the first stage is to test whether the supply received has a direct and immediate link to a specific taxable and/or exempt supply at source. Only if such a link does not exist can one proceed to the second stage and look for a link to the overall activities of the company. According to HMRC, the inputs received were linked to the sale of a share which is exempt from VAT with no deduction.

However, the Upper Tribunal concluded that the reasoning of the CJEU in the BLP case had already been overruled by later judgments such as C-465/03 - Kretztechnik and C-29/08 SKF. In both of these cases, the expenditure was also incurred in order to obtain financing for further taxable activities ("fund-raising"). Although the primary transaction was exempt from VAT or not taxable at all, the CJEU admitted the possibility of input tax deduction in these cases, given the companies' intention to use the funds for taxable activities. This conclusion was made on the assumption that the incurred input supplies were not cost component of the primary exempt transaction (i.e. sale of  shares).

Although this judgment comes from the jurisdiction of a now non-EU state and is not binding on the Czech Republic, it is certainly worthy of attention. The judgment contains a detailed analysis of some CJEU judgments, which may serve in finding appropriate arguments in similar situations. As always, however, we recommend that each situation be dealt with separately in practice, taking into account the specific circumstances.

If you have any questions about this judgment, please contact the authors or the EY team with whom you regularly work.

Authors:

Stanislav Kryl
Jevgenija Bajzíková