Case C‑502/17

C&D Foods Acquisition ApS

v

Skatteministeriet

(Request for a preliminary ruling from the Vestre Landsret)

(Reference for a preliminary ruling — Common system of value added tax (VAT) — Proposed sale of shares in a sub-subsidiary — Expenditure associated with the provision of services acquired for the purposes of that sale — Sale not carried out — Request for a deduction of input tax — Scope of VAT)

Summary — Judgment of the Court (Sixth Chamber), 8 November 2018

Harmonisation of fiscal legislation — Common system of value added tax — Economic activities within the meaning of Article 9 of Directive 2006/112 — Concept — Share disposal transaction envisaged but not completed — Absence of any direct and exclusive reason lying in the taxable economic activity or the direct, permanent and necessary extension of that activity — Precluded

(Council Directive 2006/112, Arts 2, 9 and 168)

Articles 2, 9 and 168 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax must be interpreted as meaning that a share disposal transaction, envisaged but not carried out, such as that at issue in the main proceedings, for which the direct and exclusive reason does not lie in the taxable economic activity of the company concerned, or which does not constitute the direct, permanent and necessary extension of that economic activity, does not come within the scope of value added tax.

It follows from the Court’s case-law that a company which has as its sole purpose the acquisition of holdings in other companies, without it becoming directly or indirectly involved in the management of those companies, is neither a taxable person, within the meaning of Article 9 of Directive 2006/112, nor a person entitled to deduct VAT, within the meaning of Article 168 of that directive. The mere acquisition and ownership of shares do not, in themselves, constitute an economic activity for the purposes of Directive 2006/112, conferring on the holder the status of a taxable person, since those transactions do not amount to the exploitation of property for the purpose of obtaining income therefrom on a continuing basis, as the sole return on those transactions is a possible profit on the sale of those shares (see, to that effect, judgments of 29 October 2009, SKF, C‑29/08, EU:C:2009:665, paragraph 28 and the case-law cited, and of 17 October 2018, Ryanair, C‑249/17, EU:C:2018:834, paragraph 16).

However, the position is otherwise where a financial holding in another company is accompanied by direct or indirect involvement in the management of the company in which the holding has been acquired, without prejudice to the rights held by the holding company as shareholder or associate, in so far as involvement of that kind entails carrying out transactions which are subject to VAT by virtue of Article 2 of Directive 2006/112, such as the supply of administrative, accounting and information-technology services (see, to that effect, judgment of 29 October 2009, SKF, C‑29/08, EU:C:2009:665, paragraph 30 and the case-law cited).

It follows that, in order for a share disposal transaction to be able to come within the scope of VAT, the direct and exclusive reason for that transaction must, in principle, be the taxable economic activity of the parent company in question, or that transaction must constitute the direct, permanent and necessary extension of that activity. That is the case where that transaction is carried out with a view to allocating the proceeds of that sale directly to the taxable economic activity of the parent company in question or to the economic activity carried out by the group of which it is the parent company.

(see paras 30, 32, 38, 42, operative part)