Is VAT on consulting services also recoverable when an acquisition is ultimately not made? What are the interesting practical consequences of another recent judgment of the highest European court, when you opt for the optional VAT regime for real estate rental?
Active or passive
A passive holding is a holding that is simply limited to holding participations, without actively interfering in the management of its subsidiaries. As it does not exercise an economic activity, a passive holding company is not subject to VAT and therefore cannot recover VAT. An active holding company, on the other hand, is a holding company which interferes in the management of its subsidiaries and which in this context carries out operations which are subject to VAT, such as the provision of administrative, accounting and IT services. A holding company which actively manages its subsidiaries is therefore liable with the right to deduct the VAT paid. It can therefore also recover VAT on the costs it incurs in connection with the purchase or sale of participation. This is where the self employment tax calculator is used.
When is the VAT deducted?
The holding company is therefore in principle liable only when it carries out economic activities. These activities must be permanent and be carried out for remuneration. Dividends cannot be considered as remuneration for management services, because they have no link with the activities of the holding company, but are the consequence of the simple holding of shareholdings.
If, in addition to its activities subject to VAT, the holding company also carries out exempted operations for its subsidiaries (eg granting loans), it has the status of mixed taxable person. In this case, it can only partially recover the VAT. If the holding company actively participates in the management of certain subsidiaries, but not in that of other subsidiaries, it is also considered as a mixed taxable person and can only recover VAT on the costs inherent in its economic activity. According to the Court, in this case you must use a calculation method which objectively reflects what part of the costs is actually attributable, on the one hand, to economic activity and, on the other hand, to non-economic activity. To do this,You can use an allocation key according to the investment type or the type of transaction or use other suitable allocation keys.
Choice to charge VAT
As we have already explained in detail above, you can, since 1st January 2020, under certain conditions choose to submit the lease of real property used for business purposes to VAT. This new building condition or fundamental renovation does not apply to buildings used primarily as warehouse in this case, the optional VAT regime therefore also applies to current rental contracts.