Case C-496/11

Portugal Telecom SGPS SA

v

Fazenda Pública

(Reference for a preliminary ruling from theTribunal Central Administrativo Sul)

‛VAT — Sixth Directive — Articles 17(2) and 19 — Deductions — VAT due or paid for services acquired by a holding company — Services having a direct, immediate and unequivocal relationship with taxable output transactions’

Summary — Judgment of the Court (Sixth Chamber), 6 September 2012

Harmonisation of fiscal legislation — Common system of value added tax — Deduction of input tax — Tax due or paid in respect of goods and services acquired by an holding company — Right to deduction — Conditions — Rules for calculation

(Council Directive 77/388, Art. 17(2) and (5))

Article 17(2) and (5) of Sixth Directive 77/388 on the harmonisation of the laws of the Member States relating to turnover taxes must be interpreted as meaning that a holding company which, in addition to its main activity of managing shares in companies in which it holds all or part of the share capital, acquires goods and services which it subsequently invoices to those companies is authorised to deduct the amount of input VAT provided that the input services acquired have a direct and immediate link with the output economic transactions giving rise to a right to deduct. Where those goods and services are used by the holding company in order to perform both economic transactions giving rise to a right to deduct and economic transactions which do not, the deduction is allowed only in respect of the part of the VAT which is proportional to the amount relating to the former transactions and the national tax authorities are authorised to provide for one of the methods for determining the right to deduct in Article 17(5). Where those goods and services are used both for economic and non-economic activities, Article 17(5) of Sixth Directive 77/388 is not applicable and the methods of deduction and apportionment are to be defined by the Member States which, in exercising that power, must take account of the purpose and general scheme of Sixth Directive 77/388 and, on that basis, lay down a method of calculation which objectively reflects the input expenditure actually attributed to each of those two activities.

(see para. 49, operative part)

Case C-496/11

Portugal Telecom SGPS SA

v

Fazenda Pública

(Reference for a preliminary ruling from theTribunal Central Administrativo Sul)

‛VAT — Sixth Directive — Articles 17(2) and 19 — Deductions — VAT due or paid for services acquired by a holding company — Services having a direct, immediate and unequivocal relationship with taxable output transactions’

Summary — Judgment of the Court (Sixth Chamber), 6 September 2012

Harmonisation of fiscal legislation — Common system of value added tax — Deduction of input tax — Tax due or paid in respect of goods and services acquired by an holding company — Right to deduction — Conditions — Rules for calculation

(Council Directive 77/388, Art. 17(2) and (5))

Article 17(2) and (5) of Sixth Directive 77/388 on the harmonisation of the laws of the Member States relating to turnover taxes must be interpreted as meaning that a holding company which, in addition to its main activity of managing shares in companies in which it holds all or part of the share capital, acquires goods and services which it subsequently invoices to those companies is authorised to deduct the amount of input VAT provided that the input services acquired have a direct and immediate link with the output economic transactions giving rise to a right to deduct. Where those goods and services are used by the holding company in order to perform both economic transactions giving rise to a right to deduct and economic transactions which do not, the deduction is allowed only in respect of the part of the VAT which is proportional to the amount relating to the former transactions and the national tax authorities are authorised to provide for one of the methods for determining the right to deduct in Article 17(5). Where those goods and services are used both for economic and non-economic activities, Article 17(5) of Sixth Directive 77/388 is not applicable and the methods of deduction and apportionment are to be defined by the Member States which, in exercising that power, must take account of the purpose and general scheme of Sixth Directive 77/388 and, on that basis, lay down a method of calculation which objectively reflects the input expenditure actually attributed to each of those two activities.

(see para. 49, operative part)