C-98/21 Finanzamt R (Deduction of VAT linked to a shareholder contribution)

JUDGMENT OF THE COURT (Seventh Chamber)

8 September 2022 ( *1 )

(Reference for a preliminary ruling – Value added tax (VAT) – Directive 2006/112/EC – Article 2(1), Article 9(1), Article 167 and Article 168(a) – Deduction of input tax – Definition of ‘taxable person’ – Holding company – Expenditure linked to a shareholder contribution in kind to its subsidiaries – No contribution of expenditure to the general costs – Subsidiaries’ activities largely tax-exempt)

In Case C‑98/21,

REQUEST for a preliminary ruling under Article 267 TFEU from the Bundesfinanzhof (Federal Finance Court, Germany), made by decision of 23 September 2020, received at the Court on 15 February 2021, in the proceedings

Finanzamt R

v

W GmbH,

THE COURT (Seventh Chamber),

composed of J. Passer, President of the Chamber, A. Prechal (Rapporteur), President of the Second Chamber, and N. Wahl, Judge,

Advocate General: G. Pitruzzella,

Registrar: A. Calot Escobar,

having regard to the written procedure,

after considering the observations submitted on behalf of:

W GmbH, by M. Dietrich and N. Penner, Rechtsanwälte,

the German Government, by J. Möller and P.-L. Krüger, acting as Agents,

the European Commission, by R. Pethke and V. Uher, acting as Agents,

after hearing the Opinion of the Advocate General at the sitting on 3 March 2022,

gives the following

Judgment

Legal context and the dispute

1This request for a preliminary ruling concerns the interpretation of Article 167 and Article 168(a) of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax (OJ 2006 L 347, p. 1) (‘the VAT Directive’).

2The request has been made in proceedings between Finanzamt R (Tax Office R, Germany) and W GmbH concerning the refusal to allow W to deduct input value added tax (VAT) relating to services which enabled that company to supply, as a shareholder contribution, services to its subsidiaries which themselves supply services, which are largely exempt from VAT.

Legal context

European Union law

3Article 2(1) of the VAT Directive provides:

‘The following transactions shall be subject to VAT:

…

the supply of services for consideration within the territory of a Member State by a taxable person acting as such;

…’

4Article 9(1) of that directive provides:

‘“Taxable person” shall mean any person who, independently, carries out in any place any economic activity, whatever the purpose or results of that activity.

Any activity of producers, traders or persons supplying services, including mining and agricultural activities and activities of the professions, shall be regarded as “economic activity”. The exploitation of tangible or intangible property for the purposes of obtaining income therefrom on a continuing basis shall in particular be regarded as an economic activity.’

5Under Article 167 of that directive:

‘A right of deduction shall arise at the time the deductible tax becomes chargeable.’

6Article 168 of the directive provides:

‘In so far as the goods and services are used for the purposes of the taxed transactions of a taxable person, the taxable person shall be entitled, in the Member State in which he carries out these transactions, to deduct the following from the VAT which he is liable to pay:

the VAT due or paid in that Member State in respect of supplies to him of goods or services, carried out or to be carried out by another taxable person;

…’

German law

7Paragraph 2 of the Umsatzsteuergesetz (Law on turnover tax) of 21 February 2005 (BGBl. 2005 I, p. 386), in the version applicable to the dispute in the main proceedings (‘the UStG’), is worded as follows:

‘(1) A trader is any person who carries out a commercial or professional activity independently. An undertaking comprises the whole of a trader’s commercial or professional activity. A commercial or professional activity means any permanent activity carried out for the purpose of obtaining income, even where there is no intention to make a profit and, in the case of a group of persons, even if that group carries out its activity in relation only to its members.

(2) A commercial or professional activity is not carried out independently:

1if natural persons are, individually or as a group, integrated into an undertaking such that they are obliged to follow the instructions of the trader,

2if the overall architecture of the actual links shows that a legal entity is financially, economically and organisationally integrated into the undertaking of the controlling company (tax group). The effects of the tax group are limited to internal supplies between the branches of the undertaking located in the country. These branches are to be treated as a single undertaking. …’

8Paragraph 15 of the UStG, headed ‘Deduction of input tax’, provides, in subparagraph 1 thereof:

‘The trader may deduct the following as input tax:

1. the tax lawfully payable on deliveries and other services provided to his or her business by another trader. …’

9Paragraph 42 of the Abgabenordnung (Tax Code) provides:

‘(1) It shall not be possible to circumvent tax legislation by abusing arrangements that are provided for under the law. Where the conditions set by a provision of tax law to prevent tax avoidance are satisfied, the legal consequences shall be determined under that provision. In the other cases where an abuse, within the meaning of subparagraph 2, is established, the tax shall be charged under the same conditions as under the legal arrangement appropriate to the economic transactions.

(2) An abuse shall exist where an inappropriate legal arrangement is selected which, in comparison with the consequences of an appropriate legal arrangement, confers a tax advantage on the taxable person or on a third party. This rule shall not apply if the taxable person establishes the existence of non-tax reasons behind the selection of the arrangement, which should be taken into consideration in view of his or her overall situation.’

The main proceedings and the questions referred for a preliminary ruling

10W’s activity consists in the acquisition, management and use of properties, as well as the design, remediation and realisation of building projects.

11In 2013, W held shares in X GmbH & Co. KG and Y GmbH & Co. KG, whose activity consists in the construction of properties and the sale of individual dwelling units, largely exempt from VAT.

12More specifically, in the year at issue, W held 94% of the shares of X, the remaining 6% being held by Z KG.

13By an addendum to X’s company contract of 31 January 2013, Z and W agreed to make a shareholder contribution to X. That contribution consisted, for Z, in the payment of a premium of EUR 600000 and, for W, in the supply – in proportion to its shareholding, that is, at least EUR 9.4 million, and free of charge – of architectural services, static calculation services, planning services for heat and sound insulation, energy supply and network connection services, general contractor services, fit-out services and marketing services for two properties to be built by X.W performed those services partly using its own staff or equipment and partly by procuring goods and services from other undertakings.

14By another contract of the same day concluded between W and X, it was agreed that W would supply, in exchange for payment, accounting and management services to X in connection with the construction of the two properties referred to in paragraph 13 above. Those services included the recruitment and dismissal of staff, the purchase of equipment, the preparation of annual accounts and the drafting of tax returns and their filing with the tax authorities. They excluded the services that W was to supply as a shareholder contribution.

15In addition, in 2013, W held 89.64% of the shares of Y, the remaining shares being held by P I GmbH.

16By an addendum to Y’s company contract concluded on 10 April 2013, it was agreed that P I and W would make a shareholder contribution to Y. The contribution made by P I consisted in the payment of EUR 3.5 million and that made by W consisted in the supply of services similar in nature to those supplied to X and described in paragraph 13 of the present judgment, free of charge and in proportion to its shareholdings, that is, at least EUR 30.29 million, in connection with the construction of a third property. W performed those services partly using its own staff or equipment and partly by procuring goods and services from other undertakings.

17By another contract of the same date, W and Y agreed that, in the context of the construction project of that third property, W would supply to Y, in exchange for payment, accounting and management services similar to those supplied to X and described in paragraph 14 of the present judgment.

18In its VAT returns for 2013, W deducted the whole of the input VAT paid in respect of the services in question. The German tax authorities considered that the shareholder contributions made by W to X and to Y had to be classified as non-taxable activities since they had not served to earn income for the purposes of the VAT legislation and therefore were not attributable to W’s commercial activity. The input VAT amounts paid in connection with those activities were not therefore deductible.

19After its complaint against that denial of deduction was rejected, W brought an action before the Niedersächsisches Finanzgericht (Finance Court, Lower Saxony, Germany), which upheld that action by decision of 19 April 2018. According to that court, the supply of accounting and management services by W to X and to Y entailed direct or indirect involvement in the management of those companies in exchange for payment. Having regard to that involvement by way of accounting and management services, the supply of separate services, corresponding to the shareholder contribution in kind, to the subsidiaries was part of the commercial activity of active share management. That analysis flowed from the Court’s case-law, according to which benefits in kind which served to collect funds paid to subsidiaries as shareholder contributions are part of the commercial activity of holding companies. As a result, the said court considered that W was able to deduct in full the turnover tax chargeable on the services it supplied to X and to Y as its shareholder contribution. In addition, that court specified that there had been no abuse of rights and that there were non-tax reasons warranting the arrangement chosen for the transaction in question.

20R Tax Office lodged an appeal on a point of law (Revision) against that decision before the Bundesfinanzhof (Federal Finance Court, Germany) in support of which it claims inter alia that the services at issue – namely those linked to the shareholder contributions in kind provided to the subsidiaries, which must be distinguished from the management and accounting services supplied in exchange for payment – are not remunerated and do not therefore constitute an exchange of services. Moreover, it alleged that the transactions carried out by W resulted from an abuse of the arrangements provided for by the legislation for the deduction of VAT.

21In the order for reference, the Bundesfinanzhof (Federal Finance Court) observes that W, on the one hand, and X and Y, on the other hand, do not form a tax group within the meaning of Paragraph 2(2) of the UStG.

22In addition, the referring court considers that, because W provided accounting and management services to its subsidiaries in exchange for payment and was thus involved in the management of its subsidiaries, it was entitled, despite its status as a holding company, to obtain, in principle, a deduction in full of the tax paid in respect of the input services it obtained. It recalls, in that connection, that it is apparent from the Court’s case-law that a taxable person also has a right to deduct where there is no direct and immediate link between a particular input transaction and an output transaction or transactions giving rise to the right to deduct, where the costs of the services in question are part of that taxable person’s general costs and are, as such, components of the price of the goods or services which he or she supplies. The referring court infers that expenditure incurred by a holding company involved in the management of a subsidiary for the various services it has obtained in acquiring a shareholding in that subsidiary is part of the taxable person’s general costs and is, as such, a component of the price of its services, therefore maintaining, in principle, a direct and immediate link with the holding company’s economic activity as a whole.

23However, the referring court questions whether it is impossible for W to deduct the input VAT because it obtained the input services in order to supply them to the subsidiaries which carry out tax-exempt transactions such that those input services have a direct and immediate link with exempt output transactions.

24In the first place, the referring court thus questions whether the input services that W transferred to X and to Y as shareholder contributions may be regarded as having been obtained by W for its business and whether the associated costs are part of its general costs, that is, cost components of its input accounting and management transactions for its subsidiaries. That uncertainty is due to the judgment of 8 November 2018, C&D Foods Acquisition (C‑502/17, EU:C:2018:888, paragraph 37 et seq.), from which the referring court infers that, for the purpose of the deduction of the input VAT paid by a holding company, the direct and exclusive reason for that transaction must be the taxable economic activity of that company, or that transaction must constitute the direct, permanent and necessary extension of that activity. Accordingly, without a direct and immediate link between the expenditure related to the input transactions and the taxable economic activity of the holding company, that expenditure cannot be part of W’s general costs and cannot be components of the price of the goods or services supplied by W. The referring court also refers to the judgments of 14 September 2017, Iberdrola Inmobiliaria Real Estate Investments (C‑132/16, EU:C:2017:683); of 3 July 2019, The Chancellor, Masters and Scholars of the University of Cambridge (C‑316/18, EU:C:2019:559); and of 1 October 2020, Vos Aannemingen (C‑405/19, EU:C:2020:785). Although the cases giving rise to those judgments do not concern holding companies, they confirm the need for a direct link between the input services and the taxed transactions of the company concerned in order to allow a deduction of input VAT. However, in the present case, the referring court considers that the input services could be obtained not for W’s business and its taxed transactions, but for those of its subsidiaries. Those services would, as a result, have a direct and immediate link with the largely tax-exempt activities of those subsidiaries.

25In the second place, if it were to be held that the tax paid on the input services is nevertheless deductible, the referring court questions whether the interposition of a parent company in obtaining the subsidiary’s services for the purpose of deducting input tax, to which it is in principle not entitled, does not constitute an abuse of rights. It recalls, in that regard, that, at national level, there is no possibility of a parent company obtaining, by its input interposition, a right to deduct the input tax to which it would not be entitled had it obtained those services directly. The mechanism in this case is identical from an economic standpoint to that of an input interposition such that such abuse could be considered to have arisen. In addition, it considers that if such an arrangement were not to be regarded as abusive, there is a risk that there would be a wave of interpositions from holding companies in all obtentions of services by taxable persons.

26In those circumstances, the Bundesfinanzhof (Federal Finance Court) decided to stay the proceedings and to refer the following questions to the Court for a preliminary ruling:

Under circumstances such as those in the main proceedings, is Article 168(a)[, read] in conjunction with Article 167 of [the VAT Directive,] to be interpreted in such a way that a managing holding that supplies taxable output services for subsidiaries is entitled to deduction, also for services that it obtains from third parties and contributes to the subsidiaries in return for the grant of a share in the general profit, even though the obtained inputs are not directly and immediately linked to the holding’s own transactions but instead to the (largely) tax-exempt activities of the subsidiaries, the obtained input services are not included in the price of the taxable transactions (supplied to the subsidiaries), and they do not form part of the general cost components of the holding’s own economic activity?

If Question 1 is answered in the affirmative: Does it constitute abuse of rights in the sense of the case-law of the Court …, if a managing holding is involved as an “intermediary” in obtaining services for subsidiaries in such a way that it obtains services itself for which the subsidiaries would have no entitlement to deduction if services were obtained directly, contributes these services to the subsidiaries in return for participation in its profit, and then claims full deduction on the basis of the inputs on the grounds of its position as a managing holding; or can acting as an intermediary in this way be justified on grounds that fall outside the scope of tax law, even though full deduction is in itself in conflict with the system and would result in a competitive advantage for holding structures over single-tier companies?’

The application to reopen the oral part of the procedure

27Following the delivery of the Advocate General’s Opinion, W, by document lodged at the Court Registry on 12 April 2022, applied for the oral part of the procedure to be opened, pursuant to Article 83 of the Rules of Procedure of the Court of Justice. As the oral part of the procedure had been closed following the delivery of the Advocate General’s Opinion, that application must be understood as seeking the reopening of that part of the procedure pursuant to that article.

28In support of its application, W submits, in essence, that the Advocate General’s Opinion, points 39 to 43 and 55 to 62 thereof in particular, failed to state a position on certain matters that warrant debate between the parties or state a position on certain matters that had not been debated between the parties. Those omissions and position statements justify the holding of a hearing.

29In that regard, it should be noted that, under the second paragraph of Article 252 TFEU, it is the duty of the Advocate General, acting with complete impartiality and independence, to make, in open court, reasoned submissions on cases which, in accordance with the Statute of the Court of Justice of the European Union, require his or her involvement. The Court is not bound either by the Advocate General’s Opinion or by the reasoning on which it is based (judgment of 22 November 2018, MEO – Serviços de Comunicações e Multimédia, C‑295/17, EU:C:2018:942, paragraph 25 and the case-law cited).

30It should also be recalled that neither the Statute of the Court of Justice of the European Union nor the Rules of Procedure makes provision for interested parties to submit observations in response to the Advocate General’s Opinion (judgment of 25 October 2017, Polbud – Wykonawstwo, C‑106/16, EU:C:2017:804, paragraph 23 and the case-law cited). As a consequence, the fact that a party disagrees with the Advocate General’s Opinion, irrespective of the questions examined in the Opinion, cannot in itself constitute grounds justifying the reopening of the oral procedure (judgments of 25 October 2017, Polbud – Wykonawstwo, C‑106/16, EU:C:2017:804, paragraph 24, and of 29 November 2017, King, C‑214/16, EU:C:2017:914, paragraph 27 and the case-law cited).

31By its arguments, W seeks to respond to the Advocate General’s Opinion by calling into question his analysis concerning the first question referred.

32It is true that, pursuant to Article 83 of its Rules of Procedure, the Court may, at any time, after hearing the Advocate General, order the reopening of the oral part of the procedure, in particular if it considers that it lacks sufficient information or where a party has, after the close of that part of the procedure, submitted a new fact which is of such a nature as to be a decisive factor for the decision of the Court, or where the case must be decided on the basis of an argument which has not been debated between the parties or the interested persons referred to in Article 23 of the Statute of the Court of Justice of the European Union.

33However, the omissions and position statements challenged by W all relate to matters which W and the other parties had the opportunity to assess during the written part of the procedure. No truly new matter was raised in the Advocate General’s Opinion.

34In those circumstances, the Court, after having heard the Advocate General, considers that it has all the necessary information available to it in order to answer the questions asked by the referring court.

35Accordingly, there is no need to order that the oral part of the procedure be reopened.

Consideration of the questions referred

The first question

36By its first question, the referring court asks, in essence, whether Article 168(a) of the VAT Directive, read in conjunction with Article 167 thereof, must be interpreted as meaning that a holding company which carries out taxable output transactions in favour of subsidiaries is entitled to deduct the input tax levied on the services that it obtains from third parties and supplies to the subsidiaries in return for the grant of a share in the general profit, where, first, the input services have direct and immediate links not with the holding company’s own transactions but with the largely tax-exempt activities of the subsidiaries, second, those services are not included in the price of the taxable transactions carried out in favour of the subsidiaries and, third, the said services are not part of the general costs of the holding company’s own economic activity.

37In order to answer that question, it should be borne in mind that, according to settled case-law of the Court, the right to deduct VAT provided for in Article 167 et seq. of the VAT Directive is a fundamental principle of the common system of VAT and in principle may not be limited. That right is exercisable immediately in respect of all the taxes charged on input transactions (judgment of 5 July 2018, Marle Participations, C‑320/17, EU:C:2018:537, paragraph 24 and the case-law cited).

38The deduction system is intended to relieve the trader entirely of the burden of the VAT payable or paid in the course of all his or her economic activities. The common system of VAT consequently ensures neutrality of taxation of all economic activities, whatever their purpose or results, provided that they are themselves subject, in principle, to VAT (judgment of 5 July 2018, Marle Participations, C‑320/17, EU:C:2018:537, paragraph 25 and the case-law cited).

39It is, however, apparent from Article 168(a) of the VAT Directive that, in order to enjoy a right of deduction, two conditions must be met. First, the person concerned must be a ‘taxable person’ within the meaning of the directive. Second, the goods or services relied on to confer entitlement to that right must be used by the taxable person for the purposes of his or her taxed output transactions and, as inputs, those goods or services must be supplied by another taxable person (see, to that effect, judgment of 3 July 2019, The Chancellor, Masters and Scholars of the University of Cambridge, C‑316/18, EU:C:2019:559, paragraph 23 and the case-law cited).

40Regarding the first condition, it follows from Article 9 of the VAT directive that a taxable person means any person who independently carries out in any place any economic activity, whatever the purpose or results of that activity. Furthermore, it is clear from Article 9 that the concept of ‘economic activity’ encompasses any activity of producers, traders or persons supplying services and, more specifically, the exploitation of tangible or intangible property for the purposes of obtaining income therefrom on a continuing basis.

41It is settled case-law that the mere acquisition and holding of shares in a company do not, in themselves, amount to an economic activity within the meaning of the VAT Directive, conferring on the holder the status of a taxable person, since the mere acquisition of financial holdings in other undertakings does not amount to the exploitation of property for the purpose of obtaining income therefrom on a continuing basis. Any dividend yielded by that holding, or benefit as a result of its sale, is merely the result of ownership of the property. Accordingly, a holding company whose sole purpose is to acquire shares in other companies neither has the status of taxable person within the meaning of Article 9 of the VAT Directive nor, therefore, the right to deduct VAT (see, to that effect, judgments of 17 October 2018, Ryanair, C‑249/17, EU:C:2018:834, paragraph 16, and of 8 November 2018, C&D Foods Acquisition, C‑502/17, EU:C:2018:888, paragraph 30).

42It is otherwise for mixed holding companies where the holding is accompanied by direct or indirect involvement in the management of the companies in which the holding has been acquired. According to settled case-law, such involvement of a holding company in the management of the companies in which it has acquired a shareholding constitutes an economic activity within the meaning of Article 9(1) of the VAT Directive where it entails carrying out transactions which are subject to VAT by virtue of Article 2 of that directive. The Court has specified, in that connection, that the term ‘involvement of a holding company in the management of its subsidiary’ must be understood as covering all transactions constituting an economic activity, within the meaning of the VAT Directive, performed by the holding company for the benefit of its subsidiary, which include but are not limited to the supply of administrative, financial, commercial and technical services (see, to that effect, judgments of 16 July 2015, Larentia + Minerva and Marenave Schiffahrt, C‑108/14 and C‑109/14, EU:C:2015:496, paragraphs 20 and 21 and the case-law cited, and of 5 July 2018, Marle Participations, C‑320/17, EU:C:2018:537, paragraphs 31 and 32). Consequently, for remunerated services subject to VAT coming under that involvement, a mixed holding company is a taxable person, albeit entitled to only a pro rata deduction of input tax (see, to that effect, judgment of 12 November 2020, Sonaecom, C‑42/19, EU:C:2020:913, paragraph 32 and the case-law cited).

43In the present case, the file before the Court shows that W’s activity was not limited to the acquisition and holding of shares in X and Y, but that it supplied accounting and management services to its two subsidiaries in exchange for payment, which constitute an economic activity within the meaning of the VAT Directive. Consequently, W must be regarded as a taxable person within the meaning of Article 9(1) of the VAT Directive and meets the first of the two conditions set out in paragraph 39 of the present judgment in order to enjoy a right of deduction.

44Regarding the second condition, it follows from the wording of Article 168 of the VAT Directive that the right to deduct input tax requires the goods and services obtained by the taxable person to be used for the purposes of his or her taxed transactions.

45In that connection, the Court has held that, before the taxable person is entitled to deduct input VAT, the existence of a direct and immediate link between a particular input transaction and a particular output transaction or transactions giving rise to the right to deduct is, in principle, necessary. The right to deduct VAT charged on the acquisition of input goods or services presupposes that the expenditure incurred in acquiring them is a component of the price of the output transactions giving rise to the right to deduct (see, to that effect, judgment of 12 November 2020, Sonaecom, C‑42/19, EU:C:2020:913, paragraph 41 and the case-law cited).

46However, a taxable person also has a right to deduct even where there is no direct and immediate link between a particular input transaction and an output transaction or transactions giving rise to the right to deduct where the costs of the services in question are part of his or her general costs and are, as such, components of the price of the goods or services which he or she supplies. Such costs do have a direct and immediate link with the taxable person’s economic activity as a whole (see, to that effect, judgment of 12 November 2020, Sonaecom, C‑42/19, EU:C:2020:913, paragraph 42 and the case-law cited).

47In either case, it is necessary that the cost of the input goods or services be incorporated either in the cost of particular output transactions or in the cost of goods or services supplied by the taxable person as part of his or her economic activities (see, to that effect, judgment of 3 July 2019, The Chancellor, Masters and Scholars of the University of Cambridge, C‑316/18, EU:C:2019:559, paragraph 27 and the case-law cited).

48On the other hand, where goods or services acquired by a taxable person are used for purposes of transactions that are exempt or do not fall within the scope of VAT, no output tax can be collected or input tax deducted (judgment of 17 October 2018, Ryanair, C‑249/17, EU:C:2018:834, paragraph 29 and the case-law cited).

49The Court has further specified that the existence of such a link between transactions must be assessed in the light of the objective content of those transactions. More specifically, it is necessary to consider all the circumstances surrounding the transactions concerned and to take account only of the transactions which are objectively linked to the taxable person’s taxable activity (see, to that effect, judgment of 17 October 2018, Ryanair, C‑249/17, EU:C:2018:834, paragraph 28 and the case-law cited). To that effect, the Court has held that account must be taken of the actual use of the goods and services purchased by the taxable person (see, to that effect, judgment of 12 November 2020, Sonaecom, C‑42/19, EU:C:2020:913, paragraph 66) and of the exclusive reason for the transaction in question, since that reason must be regarded as a criterion for determining the objective content (judgment of 8 November 2018, C&D Foods Acquisition, C‑502/17, EU:C:2018:888, paragraph 37 and the case-law cited).

50In the present case, it is apparent from the file before the Court that W obtained static calculation services, planning services for heat and sound insulation, energy supply and network connection services, general contractor services, fit-out services and marketing services in order to fulfil its obligations relating to shareholder contributions to its subsidiaries.

51In order for W to be able to deduct the VAT paid on those input services, it falls, in accordance with the case-law recalled in paragraphs 45 and 46 of the present judgment, to the referring court to verify either that those services have a direct and immediate link with the output transactions of that company giving rise to a right to deduct or that they are part of its general costs, such that they constitute components of the price of the goods or services which it supplies.

52Regarding the existence of a direct and immediate link with W’s output transactions, it must be pointed out that the input services listed in paragraph 50 of the present judgment are not used by W to be able to offer its output accounting and management services including the recruitment and dismissal of staff, the purchase of equipment, the preparation of annual accounts and the drafting of tax returns and their filing with the tax authorities. It follows that the expenditure incurred by W to obtain those input services cannot be regarded as being part of the components of the price of its taxed output services giving rise to a right to deduct.

53As to whether the input services obtained by W and listed in paragraph 50 of the present judgment are part of W’s general costs, such that they constitute components of the price of the goods or services which it supplies and therefore have a direct and immediate link with its economic activity as a whole, it must be stated that those services are the object of W’s shareholder contributions to its subsidiaries X and Y. As the Advocate General also indicated in point 58 of his Opinion, these are not, therefore, expenditure which W needs to incur to acquire shares, but expenditure which itself constitutes the very object of W’s shareholder contribution to its subsidiaries. Such a contribution from a holding company in favour of its subsidiaries, whether in cash or in kind, comes under holding of shares which, as is set out in paragraph 41 of the present judgment, does not amount to an economic activity within the meaning of the VAT Directive and does not therefore give rise to a right to deduct. The exclusive reason for the transaction in question is a shareholder contribution from W.

54Furthermore, when the actual use of the services obtained by W is taken into account, it must be recalled that W has claimed that those services were a shareholder contribution in kind and that, to that end, it had to transfer them free of charge to its subsidiaries for them to use them for their transactions. The fact that those services are intended to be used by W’s subsidiaries establishes a direct link with the transactions of those subsidiaries and confirms that there is no direct and immediate link with W’s economic activity. The finding that the said services have a direct link with the activities of those subsidiaries is not called into question by the fact that they were transferred by W to its subsidiaries, since it is necessary to take into account the actual use of those services.

55As is stated in paragraph 38 of the present judgment, the deduction system is intended to relieve the trader entirely of the burden of the VAT payable and paid in the course of all his or her economic activities. Accordingly, the Court has found that no right to deduct can arise from expenses linked not to transactions carried out by the taxable person but to transactions carried out by a third party (see, to that effect, judgment of 1 October 2020, Vos Aannemingen, C‑405/19, EU:C:2020:785, paragraph 38). The fact that that finding was made in the context of a case which did not concern a holding company is, contrary to what W argues, irrelevant since it corresponds to a rule which is applicable generally to the right to deduct. As it is apparent from the actual use of the services obtained by W that they are linked directly to its subsidiaries’ transactions, that link precludes the grant of a right to deduct to W in respect of those services.

56The objective content of the transaction therefore reveals that there is no direct and immediate link between the costs of the services obtained by W and its economic activity. Those costs are not part, as general costs, of the components of W’s management and accounting services.

57That conclusion cannot be called into question by the circumstance put forward by W that it is only thanks to its shareholder contributions that its subsidiaries are able to maintain their own activities and, accordingly, need its accounting and management services. Assuming that those circumstances are established, they do not demonstrate a direct and immediate link between the services forming the object of those contributions and W’s economic activity. The objective behind acquiring the input services was to permit a shareholder contribution which could not be regarded as a transaction the exclusive and direct reason for which was W’s economic activity, that is, the supply to its subsidiaries of accounting and management services subject to VAT.

58Having regard to the foregoing considerations, the answer to the first question is that Article 168(a) of the VAT Directive, read in conjunction with Article 167 thereof, must be interpreted as meaning that a holding company which carries out taxable output transactions in favour of subsidiaries is not entitled to deduct the input tax levied on the services that it obtains from third parties and supplies to the subsidiaries in return for the grant of a share in the general profit, where, first, the input services have direct and immediate links not with the holding company’s own transactions but with the largely tax-exempt activities of the subsidiaries, second, those services are not included in the price of the taxable transactions carried out in favour of the subsidiaries and, third, the said services are not part of the general costs of the holding company’s own economic activity.

The second question

59In the light of the answer given to the first question, there is no longer any need to answer the second question.

Costs

60Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable.

Operative part

On those grounds, the Court (Seventh Chamber) hereby rules:

Article 168(a) of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax, read in conjunction with Article 167 thereof,

Signatures

must be interpreted as meaning that:

a holding company which carries out taxable output transactions in favour of subsidiaries is not entitled to deduct the input tax levied on the services that it obtains from third parties and supplies to the subsidiaries in return for the grant of a share in the general profit, where, first, the input services have direct and immediate links not with the holding company’s own transactions but with the largely tax-exempt activities of the subsidiaries, second, those services are not included in the price of the taxable transactions carried out in favour of the subsidiaries and, third, the said services are not part of the general costs of the holding company’s own economic activity.

[Signatures]

( *1 ) Language of the case: German.

OPINION OF ADVOCATE GENERAL

PITRUZZELLA

delivered on 3 March 2022 ¹

(Reference for a preliminary ruling – Value added tax (VAT) – Deductions – Intervention by a holding company in the operations of its subsidiaries – Activities of subsidiaries largely tax-exempt – General costs – Abusive practices)

1This request for a preliminary ruling, lodged by the Bundesfinanzhof (Federal Finance Court, Germany), essentially concerns certain aspects relating to the possibilities for deduction of VAT by a holding company.

2In general, holding companies are companies that hold all or part of the capital of other companies, which may have as their object different economic sectors or different stages of the same production process. In terms of the activities carried out, it is customary to distinguish a ‘pure holding company’, where the activity is limited to the acquisition and holding of company shares and to the exercise of the corresponding shareholder rights, from a ‘mixed holding company’, which combines that activity with its own production or trading activity.

3The European legal framework governing VAT – namely Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax (‘the VAT Directive’) – ² does not lay down specific provisions regarding holding companies. The legal regime applicable to companies of this kind has therefore been shaped over time by various judgments of the Court of Justice. Nevertheless, the subject continues to raise questions because of the number and complexity of factual situations that arise in practice and the difficulties encountered in bringing those situations together into a single system.

4The present case concerns the right of W-GmbH (‘W’ or ‘the appellant’) – a mixed holding company owning the controlling stake in the companies X-KG and Y-KG (‘the subsidiaries’), for which it also provides administrative and accounting services in return for payment – to deduct input VAT paid on the purchase of goods and services intended, by way of a shareholder’s contribution, for the benefit of its subsidiaries, in respect of the largely VAT-exempt business activities carried out by those companies.

5The Court of Justice is being asked to clarify whether Article 168(a), read in conjunction with Article 167 of the VAT Directive, must be interpreted as meaning that this right of deduction exists.

6If that question is answered in the affirmative, the Court will also have to determine whether such a transaction can be regarded as abusive, in view of the fact that the subsidiaries would not be entitled to deduct the input tax paid in full if they had purchased those goods and services directly instead of receiving them from the holding company.

I. Legal framework

A. European Union law

7Article 2(1) of the VAT Directive provides as follows:

‘The following transactions shall be subject to VAT:

the supply of goods for consideration within the territory of a Member State by a taxable person acting as such;

…

the supply of services for consideration within the territory of a Member State by a taxable person acting as such.

…’

8Article 9(1) of that directive provides as follows:

‘“Taxable person” shall mean any person who, independently, carries out in any place any economic activity, whatever the purpose or results of that activity.

Any activity of producers, traders or persons supplying services, including mining and agricultural activities and activities of the professions, shall be regarded as “economic activity”. The exploitation of tangible or intangible property for the purposes of obtaining income therefrom on a continuing basis shall in particular be regarded as an economic activity.’

9In accordance with Article 167 of that directive, a ‘right of deduction shall arise at the time the deductible tax becomes chargeable’.

10Article 168 of the directive provides as follows:

‘In so far as the goods and services are used for the purposes of the taxed transactions of a taxable person, the taxable person shall be entitled, in the Member State in which he carries out these transactions, to deduct the following from the VAT which he is liable to pay:

the VAT due or paid in that Member State in respect of supplies to him of goods or services, carried out or to be carried out by another taxable person;

…’

B. German law

11Paragraph 2 of the Umsatzsteuergesetz (Law on Turnover Tax) of 21 February 2005 ³ (‘the UStG’) states as follows:

‘1. A trader is any person who independently carries out a commercial or professional activity. An undertaking comprises the whole of a trader’s commercial or professional activity. A commercial or professional activity shall mean any permanent activity carried out for the purpose of obtaining income, even where there is no intention to make a profit or a group of persons carries out its activities only in relation to its members.

2. A commercial or professional activity is not exercised independently:

if natural persons are, individually or as a group, integrated in an undertaking in such a way that they are required to follow the instructions of the trader,

if, in the light of the overall actual circumstances, a legal entity is financially, economically and organisationally integrated into the undertaking of the controlling company (tax group). The effects of the tax group are limited to internal supplies between the constituent parts of the undertaking located in the country. These constituent parts are to be treated as a single undertaking. …’

12Paragraph 15 of the UStG, headed ‘Deduction of input tax’, is worded as follows:

‘(1) A trader may deduct the following as input tax:

1the tax lawfully payable on goods and services provided to his or her business by another trader. …’

13Paragraph 42 of the Abgabenordnung (Tax Code), ⁴ in the version applicable to the dispute in the main proceedings (‘the AO’), provides that:

‘(1) It shall not be possible to circumvent tax legislation by abusing arrangements that are possible under the law. Where the conditions set by a provision of tax law to prevent tax avoidance are satisfied, the legal consequences shall be determined under that provision. If not specified, tax shall, in the event of abuse within the meaning of subparagraph 2, be charged to the same extent as if a loyal arrangement appropriate to the economic transactions concerned had been used.

(2) An abuse shall exist where an inappropriate loyal arrangement is selected which, in comparison with an appropriate arrangement, leads to a tax advantage unintended by law for the taxable person or a third party. This shall not apply where the taxable person demonstrates non-tax reasons for the arrangement selected which are relevant in view of the overall situation.’

II. The facts giving rise to the dispute, the main proceedings and the questions referred

14W is a limited liability company the activity of which consists in the purchase, management and re-utilisation of properties, as well as project planning and the renovation and preparation of building projects.

15In 2013, W held shares in X-KG and Y-KG, both of which were established as limited partnerships with a limited liability company as general partner (GmbH & Co. KG), involved in the construction of properties and the selling of individual dwelling units predominantly exempt from value added tax.

16More specifically, during the year at issue, the shareholders of X-KG were Z-KG, which held 6% of its shares, and W, which held 94% of its shares. On 31 January 2013, it was agreed that Z-KG would pay X-KG a premium of EUR 600000 as a shareholder’s contribution and that W would provide services free of charge worth EUR 9.4 million for two building projects undertaken by the subsidiary X-KG. Specifically, W was to provide X-KG with planning services for energy supply, heat insulation and network connection, architectural services, general contractor services, materials fitting-out and marketing services, as well as structural studies, partly using its own staff and equipment and partly by procuring goods and services from other companies.

17On the same day, W and X-KG concluded a further agreement, whereby the former would supply accounting and management services to the latter in connection with the two building projects referred to above in return for payment. Those services included the recruitment and dismissal of staff, the purchase of equipment, and the preparation of accounting records and tax returns and filing with the tax authorities. Those accounting and management services expressly excluded services to be supplied by the appellant by way of a shareholder’s contribution.

18Furthermore, in 2013 W held 89.64% of the shares in Y-KG, with the remainder being held by P I GmbH. On 10 April 2013, it was agreed that P I GmbH would pay Y-KG a premium of EUR 3.5 million and that W would provide services – similar to those described in point 16 of this Opinion – free of charge worth EUR 30.29 million in connection with a building project of Y-KG. On the same day, W and Y-KG also concluded an agreement whereby the former would provide accounting and management services for the latter similar to those described in point 17 above in exchange for payment.

19In its VAT returns for 2013, W made a deduction in full of the VAT paid on its taxable transactions. Following a tax audit, the German tax authorities determined, however, that the shareholder’s contributions made by W to X-KG and Y-KG must be classified as non-taxable activities, as they did not serve to earn income under the Law on Turnover Tax and could not therefore be classified as a business activity of the holding company. The input VAT amounts paid in relation to these activities were not therefore deductible.

20After its administrative complaint was rejected, W brought an action before the Niedersächsisches Finanzgericht (Finance Court, Lower Saxony, Germany), which upheld that action in a judgment of 19 April 2018. According to that court, W could deduct the input value added tax in full, because the supply of accounting and management services by W to X-KG and Y-KG involved direct or indirect involvement in the management of those companies in exchange for payment. As a result, the supply of services in kind as a shareholder’s contribution would also come within the commercial activity of active management of shareholdings. The court also held that there were grounds outside of the scope of tax law that warranted the chosen arrangement for the transaction in question.

21The Finanzamt (Tax Office, Germany) lodged an appeal (Revision) against that decision before the referring court, the Bundesfinanzhof (Federal Finance Court), claiming the following in support of that action: (i) the disputed services – namely those linked to the shareholder’s contributions in kind provided to the subsidiaries – to be distinguished from the management and accounting services supplied in exchange for payment, are not remunerated and do not therefore constitute an exchange; (ii) the operations carried out by W would, in any event, constitute an abuse of the VAT deduction rules.

22In the request for a preliminary ruling, the Bundesfinanzhof (Federal Finance Court) notes, first of all, that W and its subsidiaries do not form a ‘tax group’ within the meaning of Paragraph 2(2) of the UStG, so that those companies cannot be regarded as a single undertaking.

23The referring court then observes that because W provided accounting and management services to its subsidiaries in exchange for payment, it is, in principle, despite its capacity as a holding company, able to obtain a deduction in full of the input tax paid in respect of those services. On the basis of the case-law of the Court of Justice, the referring court then holds that such a right to deduction arises either where the costs relate to a particular input transaction that has an immediate and direct link to output transactions giving rise to the right to deduction or where those costs are part of the company’s general costs and are, as such, components of the price of the goods or services that it supplies.

24However, the Bundesfinanzhof (Federal Finance Court) considers it questionable whether the services passed on to X-KG and Y-KG as shareholder’s contributions by W have an immediate and direct link to the taxable services provided by that company, and thus whether they can be considered general costs, in so far as those services were in fact instrumental, not to the economic activities of the holding company, but to the performance of the largely tax-exempt activities of its subsidiaries.

25Second, the referring court asks – should the Court take the view that the tax paid by W on these taxable transactions is theoretically deductible under the VAT Directive – whether the involvement of a parent company in the purchase of services for a subsidiary in order to deduct input tax, where the subsidiary is not entitled to such a deduction, constitutes circumvention of the VAT rules.

26It points out, in that regard, that the assessment of whether such an abuse exists requires a factual appraisal of the circumstances of the individual case, aimed at ascertaining whether there are non-tax reasons for the contested transaction and that, under national law, that factual appraisal is carried out by the tax court, and the corresponding judgment is binding on the Bundesfinanzhof (Federal Finance Court). Since, therefore, in the main proceedings, the Niedersächsisches Finanzgericht (Finance Court, Lower Saxony), held that there were grounds falling outside of the scope of tax law which supported the transactions carried out by W, the referring court asks whether the existence of those reasons precludes a finding of abuse of rights.

27Lastly, the referring court observes that if a transaction of this kind were not to be considered an abuse of rights, there is a risk that this could legitimise any involvement of a holding company in the purchases of its subsidiaries for the purpose of obtaining a right to deduct VAT to which those subsidiaries would not have been entitled in the case of a direct purchase.

28Accordingly, the Bundesfinanzhof (Federal Finance Court) stayed the proceedings and referred the following questions to the Court for a preliminary ruling:

Under circumstances such as those in the main proceedings, is Article 168(a) in conjunction with Article 167 of [the VAT Directive] to be interpreted in such a way that a managing holding that supplies taxable output services for subsidiaries is entitled to deduction, also for services that it obtains from third parties and contributes to the subsidiaries in return for the grant of a share in the general profit, even though the obtained inputs are not directly and immediately linked to the holding’s own transactions but instead to the (largely) tax-exempt activities of the subsidiaries, the obtained input services are not included in the price of the taxable transactions (supplied to the subsidiaries), and they do not form part of the general cost components of the holding’s own economic activity?

If Question 1 is answered in the affirmative: Does it constitute abuse of rights in the sense of the case-law of the Court of Justice of the European Union, if a managing holding is involved as an ‘intermediary’ in obtaining services for subsidiaries in such a way that it obtains services itself for which the subsidiaries would have no entitlement to deduction if services were obtained directly, contributes these services to the subsidiaries in return for participation in its profit, and then claims full deduction on the basis of the inputs on the grounds of its position as a managing holding; or can acting as an intermediary in this way be justified on grounds that fall outside the scope of tax law, even though full deduction is in itself in conflict with the system and would result in a competitive advantage for holding structures over single-tier companies?’

III. Main arguments of the parties

29W, the German Government and the Commission submitted observations in the written procedure before the Court.

30In its observations, W states, first of all, that the transactions described above are supported by grounds falling outside of the scope of tax law: (i) first, because the implementation of the projects through the subsidiaries makes it possible to limit the liability connected with the decontamination of the sites of the construction projects (in the present case, these are military buildings contaminated by explosive munitions); (ii) second, because the payment of a contribution in kind, rather than in cash, provides better protection for W from potential actions by creditors of the subsidiaries or a court-appointed administrator, since it would make sense for those latter parties to demand the services that are the subject of that contribution only in the event that the construction projects are continued, but this would be highly unlikely if the subsidiaries were insolvent; (iii) third, because centralising the design and procurement activities within the holding company generates efficiency gains and economic advantages in terms of reducing procurement costs; (iv) last, because this structure preserves the confidentiality of profit margins, since a purchaser would only have a right to information vis-à-vis the contractual parties and, therefore, the subsidiaries and not the parent company W.

31On that basis, in relation to the first question referred, W asserts that it is entitled to the deduction because it was acting solely as a taxable person, involving itself in the management of its subsidiaries by providing administrative and accounting services in exchange for payment. It considers that the costs of services acquired by it in respect of contributions in kind made to its subsidiaries entitle it to deduct input tax in full, because those costs form part of its general costs, in that they contribute to strengthening its economic activity as a whole. W also contests the assertion that it was denied the right to deduct input tax on account of the partially exempt outputs provided by its subsidiaries, since they are separate taxable persons and the inputs do not have an immediate and direct link to the specific outputs provided by its subsidiaries.

32As regards the second question referred, W considers that the performance of the transactions in question does not constitute an abuse of rights, since it is justified by the grounds falling outside of the scope of tax law described in point 30 of this Opinion. On this point, W also points out that the advantage gained by a multi-tier organisation including a holding company, as compared to a single-tier organisation, would merely represent freedom of organisation and not abuse.

33Using largely overlapping arguments, the German Government and the Commission take the view that the first question should be answered in the negative. Given that the right to deduct VAT laid down in Article 168(a) of the VAT Directive presumes a direct and immediate link between, on the one hand, a specific input transaction and, on the other hand, one or more output transactions generating a right to deduction or the taxable person’s economic activity as a whole, in the present case, the input transactions do not have an immediate and direct link with the economic activities of the holding company. Although it is true that accounting and management services supplied in exchange for payment constitute a taxable transaction, in the present case the input services purchased and supplied free of charge to the subsidiaries do not constitute component elements of the price of those services. On the other hand, under the VAT Directive, a taxable person is authorised to deduct the VAT due or paid in respect of goods and services supplied to it by another taxable person only in so far as they are used for the purposes of its own taxable transactions. Since, in the present case, those goods and services were used to carry out the output transactions of the subsidiaries, most of which are subject to an exemption regime, there is no right to deduct.

34As regards the second question referred, the German Government is of the view – in the unlikely event that the answer to the first question is in the affirmative – that the transaction in any event constitutes an abuse, because it is primarily aimed at pursuing a tax advantage contrary to the objective pursued by the relevant provisions of the VAT Directive. The Commission did not consider it necessary to provide a reply on this issue.

IV. Legal analysis

A. Preliminary remarks

35In order to provide a suggested answer to the questions referred for a preliminary ruling, in the following paragraphs I will focus on the conditions that must be met to enable a holding company to benefit from the right to deduct VAT, and those that can be used to establish that an abuse of rights has occurred. On the basis of the file available to the Court, I will then provide guidance to enable the national court to assess whether those conditions are met in the present case.

36It should in any case be understood that it is for the referring court to assess whether those conditions are met in this case, taking account of all the circumstances surrounding the transactions at issue. ⁵ According to settled case-law, the system of cooperation established by Article 267 TFEU is based on a clear division of responsibilities between the national courts and the Court of Justice. In proceedings brought on the basis of that article, the reconstruction of the facts and the interpretation of provisions of national law is a matter for the courts of the Member States. However, the Court does have jurisdiction to provide the national court with all the guidance as to the interpretation of EU law and the information, taken from the documents in the main proceedings and from the observations, both written and oral, submitted to it, necessary to enable that national court to reach a decision. ⁶

B. First question referred

37By its first question, the referring court asks whether, in circumstances such as those of the main proceedings, Article 168(a), read in conjunction with Article 167, of the VAT Directive must be interpreted as meaning that a holding company that undertakes taxable output transactions for subsidiaries is entitled to deduction of input tax payable on services that it obtains from third parties and contributes to the subsidiaries in return for the grant of a share in the general profit, even though the obtained inputs: (i) are not directly and immediately linked to the holding’s own transactions but instead to the (largely) tax-exempt activities of the subsidiaries; (ii) are not included in the price of the taxable transactions (supplied to the subsidiaries), and (iii) do not form part of the general cost components of the holding’s own economic activity.

38To answer this question, I note that, according to settled case-law, under Article 168 of the VAT Directive, in order to have a right of deduction, it is necessary, first, that the person concerned be a ‘taxable person’, within the meaning of that directive, and, second, that the goods or services relied on to confer entitlement to that right be used by the taxable person for the purposes of his or her taxed output transactions. ⁷ I will elaborate on each of these assumptions in the following paragraphs.

1. W’s status as a taxable person

39According to Article 9 of the VAT Directive, a ‘taxable person’ is any person who, independently, carries out in any place any economic activity, whatever the purpose or results of that activity. Furthermore, it is clear from that article that the concept of economic activity encompasses any activity of producers, traders or persons supplying services and, more specifically, the exploitation of tangible or intangible property for the purposes of obtaining income therefrom on a continuing basis. ⁸

40According to settled case-law, a holding company does not have the status of taxable person within the meaning of Article 9 of the VAT Directive and, as a result, does not have the right to deduct tax, when it has as its sole purpose the acquisition of shares in other undertakings and does not involve itself directly or indirectly in the management of those undertakings. The mere acquisition and holding of shares in a company do not, in themselves, amount to an economic activity within the meaning of the VAT Directive, conferring on the holder the status of a taxable person, since such transactions cannot be regarded as the exploitation of property for the purpose of obtaining income therefrom on a continuing basis. Any dividend yielded by that holding or capital gain achieved on its sale is merely the result of ownership of the property. ⁹

41That is not the case where the holding is accompanied by direct or indirect involvement in the management of the companies in which the holding has been acquired, where that entails carrying out transactions which are subject to VAT. ¹⁰ Specifically, a mixed holding company that not only holds shares in companies, but also supplies remunerated services that are subject to VAT to those companies is accordingly a taxable person itself which is entitled, in principle, to deduction of input tax. ¹¹ Such holding companies are usually classified as ‘management’ or ‘managing’ holding companies. ¹²

42The Court has held that the term ‘involvement of a holding company in the management of its subsidiary’ must be understood as covering all transactions constituting an economic activity, within the meaning of the VAT Directive, performed by the holding company for the benefit of its subsidiary. ¹³ Although the examples of activities that can be classified as such involvement do not constitute an exhaustive list, it is clear that this includes the provision of administrative, financial, commercial and technical services. ¹⁴

43In the present case, the case file available to the Court shows that W provided its subsidiaries with administrative and accounting services subject to VAT (as mentioned above, these were services relating to the recruitment and dismissal of staff, the purchase of equipment, the preparation of accounting records and tax returns). It can therefore certainly be asserted that it exercised an economic activity by involving itself in the management of its subsidiaries, carrying out transactions subject to VAT, and must therefore be regarded as a taxable person within the meaning of Article 9(1) of the VAT Directive.

2. The link between the goods or services relied on by the taxable person to confer entitlement to the right of deduction and his or her taxable output transactions

44As mentioned above, in order for the tax to be deductible, in addition to the purchaser being a taxable person, there must also be a link between the input taxable transactions and the economic activity of the purchaser. In other words, these transactions must be genuinely connected to the exercise of the business.

45It follows from Article 168 of the VAT Directive that, in so far as a taxable person uses goods or services for the purposes of his or her taxed transactions, he or she is entitled to deduct the VAT paid or payable in respect of those goods or services. ¹⁵

46In accordance with settled case-law, the existence of a direct and immediate link between a particular input transaction and a particular output transaction or transactions giving rise to the right to deduct is necessary before the taxable person is entitled to deduct input VAT. ¹⁶

47However, a taxable person also has a right to deduct even where there is no direct and immediate link between a particular input transaction and an output transaction or transactions giving rise to the right to deduct where the costs of the services in question are part of his or her general costs. Indeed, such costs do have a direct and immediate link with the taxable person’s economic activity as a whole, generally speaking. ¹⁷

48In either case, the cost of the input services must be incorporated either in the cost of particular output transactions or in the cost of goods or services supplied by the taxable person as part of his or her economic activities. ¹⁸

49On the other hand, where goods or services acquired by a taxable person are connected to transactions that are exempt or do not fall within the scope of VAT, no output tax can be collected or input tax deducted. ¹⁹

50The Court has also stated that, in order to assess whether the conditions set out above have been met, the exclusive reason for the transaction at issue must also be taken into account, since that reason must be regarded as a criterion for determining the objective content thereof. Where it is clear that a transaction has not been performed for the purposes of the taxable activities of a taxable person, that transaction cannot be regarded as having a direct and immediate link with those activities, even if that transaction would, in the light of its objective content, be subject to VAT. ²⁰

51In the present case, it is apparent from the file before the Court that the goods and services that were the subject of W’s taxable transactions were not used, within the meaning of Article 168 of the VAT Directive, for the purposes of its taxable transactions but rather, having regard to their ‘exclusive purpose’, were used in the context of providing a shareholder’s contribution to its two subsidiaries, naturally free of charge. A contribution by a holding company to companies in which it holds shares – whether in cash or in kind – is by its very nature designed to facilitate the receipt of dividends.

52In those circumstances, the output transaction of making a contribution in kind to subsidiaries must not be regarded as an ‘economic activity’ within the meaning of Article 9(1) of that same directive. As has been noted above, such activity concerns the exploitation of tangible or intangible property for the purposes of obtaining income therefrom on a continuing basis, a concept that, according to settled case-law, does not include the mere receipt of dividends. It follows that the costs incurred in purchasing goods and services to be used in providing the contribution to subsidiaries cannot be deducted, because they are intended for the performance of an activity that, for W, is not economic in nature.

53Moreover, on the basis of the description given in the order for reference, it is clear that the taxable transactions in respect of which the right to deduct is being challenged (expenditure incurred in respect of the services of architects, structural calculations, planning, general contractors, fitting-out and marketing) had an immediate and direct link with the output transactions carried out by the subsidiaries in the context of their business of constructing buildings and selling individual dwelling units. This link is objectively discernible, given the nature of the activities in question, and is not precluded by the fact that the services purchased by W were then transferred by W to the subsidiaries, and indeed appears to be confirmed by that fact.

54The Court can therefore rule out the possibility that the abovementioned taxable transactions had an immediate and direct link with W’s output transactions subject to VAT, which were represented by the supply of accounting and management services to the subsidiaries in exchange for payment, and that the cost of those taxable transactions was incorporated into the price of those administration and accounting services.

55All that remains, therefore, is to determine whether the transactions in question can be said to come within the scope of W’s general costs. As far as I am aware, there is no common definition of ‘general costs’ in the Court’s precedents, but rather only a few decisions in which there is a reference to the concept of general costs in particular circumstances.

56Specifically, according to settled case-law, and as also mentioned extensively by W in its observations, expenditure incurred by a holding company involved in the management of a subsidiary in respect of the various services it has purchased in connection with the acquisition of a shareholding in that subsidiary forms part of the taxable person’s general costs and is, as such, a cost component of its products. Costs of this nature therefore have a direct and immediate link with the holding company’s economic activity as a whole. ²¹

57In my view, the case at issue in the main proceedings clearly differs from those dealt with in the case-law cited above. Indeed, those cases related to expenses (such as legal or financial consulting) connected with the acquisition of shareholdings in subsidiaries, from which the holding company actually benefited. Those expenses, therefore, appear to have an immediate and direct link with the overall economic activity of the managing holding company providing services subject to VAT to the subsidiaries, since they constitute the necessary precondition for the shareholding to be acquired and thus for the economic activity of the holding company to be carried out.

58Conversely, in the present case, the input expenses incurred by W do not have a direct and immediate relationship with the business activity of that company, since – as has already been explained in the preceding paragraphs – they constitute the basis for a contribution ‘in kind’ made to the subsidiaries. These are not, therefore, expenses that the holding company needs to incur to acquire shares, but expenses that themselves constitute the basis for the contribution made to the subsidiaries intended to facilitate the performance of the economic activity of those subsidiaries, most of which is largely tax-exempt. It is therefore my view that this case-law cannot be relied upon to recognise a right of deduction for W.

59On the other hand, I consider it more useful, for the purposes of resolving the present case, that a recent judgment of the Court of Justice denied a right to deduct input VAT paid by a holding company in a case where the services purchased (in order to benefit from a bond loan) had actually been used to carry out an exempt transaction (the provision of a loan to the parent company). ²² Indeed, it follows from that judgment that there is a need to assess the actual purpose of the taxable transaction on which the input VAT was paid, with a right of deduction being excluded where that transaction is linked to the performance of an exempt output transaction. It is therefore essential to emphasise that in the present case, in the light of what has been set out in point 53 above, the transactions in respect of which the right to deduction is sought had in fact an immediate and direct link with the subsidiaries’ exempt activities, with the result that the right to deduction should be excluded.

60As further confirmation of the solution reached, reference can also be made to the case-law of the Court of Justice which, although not dealing specifically with holding companies, has in any event provided – contrary to what was alleged by W in its observations – generally valid rules for the deduction of VAT and therefore also for the case at hand.

61The fact that the expenditure incurred by the taxable person was incurred not for the purposes of his or her own taxable transactions but for those of a transaction carried out by a third party would be such as to break the direct and immediate link that must exist between the acquisition of input services and the output transaction, thus preventing the taxable person from proceeding to deduct in full the associated VAT. ²³ That principle is applicable to the case in the main proceedings, in view of the different legal personality of the subsidiaries as compared with the holding company.

62Finally, the observation made by the Bundesfinanzhof (Federal Finance Court) in paragraph 59 of the order for reference does not appear to me to be irrelevant: if the Court were to reason along the lines proposed by W and upheld by the court at first instance, this would legitimise, in situations where there is involvement by a holding company in subsidiary companies carrying on an exempt activity, the general intervention by the former in the purchase of goods and services used for the activities of the latter, with the holding company thus having a full right of deduction in disregard of the principle of the neutrality of VAT.

63In the light of the above, I believe that the first question should be answered as follows: ‘Article 168(a), read in conjunction with Article 167, 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 managing holding that provides taxable output services to subsidiaries is not entitled to deduct the VAT paid for services that it obtains from third parties and provides to the subsidiaries in return for a share in the general profit, where the input services obtained are not directly and immediately linked to the holding’s own transactions but instead to the (largely) tax-exempt activities of the subsidiaries, those obtained input services cannot be included in the price of the taxable transactions (in the form of services rendered to the subsidiaries), and do not form part of the general cost components of the holding’s own economic activity.’

C. Second question referred

64By its second question, the referring court asks – if the first question were to be answered in the affirmative – whether it constitutes an abuse of rights in the sense of the case-law of the Court if a managing holding is involved as an ‘intermediary’ in obtaining services for subsidiaries in such a way that it obtains services itself for which the subsidiaries would have no entitlement to deduction if the services were obtained directly, provides those services to the subsidiaries in return for a share in their profit, and then claims full deduction on the basis of the obtained input services on the grounds of its position as a managing holding; or whether acting as an intermediary in this way is justified on grounds that fall outside the scope of tax law, even though full deduction is in itself in conflict with the system and would result in a competitive advantage for holding structures over single-tier companies.

65For the reasons set out in the preceding paragraphs, I consider that the answer to the first question referred for a preliminary ruling must be in the negative and that, therefore, in the present case, W has not correctly applied the conditions laid down by the relevant provisions of the VAT Directive. The question of possible abuse of rights does not therefore require an answer. However, I think it would be useful to make a few remarks in response to the second question, should the Court come to a different conclusion.

66As we know, preventing possible tax evasion, avoidance and abuse is an objective recognised and encouraged by the European Union’s VAT Directive. ²⁴

67The effect of the principle of preventing abuses of rights is therefore to prohibit wholly artificial arrangements which do not reflect economic reality and are set up with the sole aim of obtaining a tax advantage. ²⁵ That principle, in relation to VAT, is not contained in a specific provision of EU law but is based on the Court’s settled case-law, according to which the refusal of a right or an advantage on account of abusive or fraudulent acts is simply the consequence of the finding that, in the event of abuse of rights, the objective conditions required in order to obtain the advantage sought are not, in fact, met. ²⁶

68In order for it to be found that an abusive practice exists, the tax authority of a Member State must demonstrate that two conditions are met. First, it must be apparent that the transactions concerned, notwithstanding formal application of the conditions laid down by the relevant provisions of the VAT Directive and of national legislation transposing it, result in the accrual of a tax advantage the grant of which would be contrary to the purpose of those provisions (‘the objective condition’). Second, it must also be apparent from a number of objective factors that the essential aim of the transactions concerned is to obtain a tax advantage (‘the subjective condition’). ²⁷

69As already mentioned, it is for the national court to determine whether the elements constituting abusive conduct are present in the main proceedings. However, the Court, when giving a preliminary ruling, may, where appropriate, provide clarification designed to give the national court guidance in its interpretation. ²⁸

1. The objective condition characterising an abuse of rights

70As regards the objective condition characterising an abuse of rights, it should first be borne in mind that the deduction system is meant to relieve the trader entirely of the burden of the VAT payable or paid in the course of all his or her economic activities. Consequently, the rules in question are intended to ensure neutrality of taxation only for economic activities subject to VAT. ²⁹

71On the basis of the information stated in the request for a preliminary ruling, I am of the view that the tax advantage conferred by the deduction on the appellant is contrary to the above objective. In fact, given that the goods and services purchased as inputs by W are used for the economic activity of the subsidiaries, W’s intervention has made it possible to benefit from a deduction that is not matched by any output taxation, either in relation to W itself, since the supply of the services in question to the subsidiaries is a non-taxable activity, or in relation to the subsidiaries, whose activity is largely tax-exempt.

72This situation therefore appears to be contrary to the aim of the common system of VAT, which, as has been said, is to ensure the neutrality of taxation only for the taxable economic activities referred to in Article 9 of the VAT Directive.

73This is confirmed by the fact that if the Court were to view this situation in terms of the corporate group, the tax benefit deriving from the full deduction of the input VAT paid by W would not have been achieved if the transaction had been constructed differently.

74Let us assume, first, that the appellant had transferred the goods and services acquired as inputs to the subsidiaries in exchange for payment. In that case, the transfer would have been subject to VAT, with the consequence that, on the one hand, W would have been able to deduct the tax on the taxable transactions, as these were purchases of goods and services used for the purposes of its taxable transactions (namely, supplies to subsidiaries in exchange for payment). On the other hand, the tax paid by the subsidiaries would not have been deductible, or not in its entirety, in view of the fact that they carried out activities that were predominantly exempt.

75Similarly, a full right of deduction would not have applied if W and its subsidiaries had formed a VAT group, within the meaning of Article 11 of the VAT Directive. Indeed, in such a case, because a VAT group is considered to be a single taxable person, ³⁰ the right to deduct input tax is determined solely on the basis of the transactions of the group – and therefore also the subsidiaries – with third parties. ³¹ The goods and services acquired as inputs by W should therefore have been linked – in the context of its business activity as a whole – with the largely exempt services relating to the construction and sale of housing carried out by the subsidiaries, with the result that deduction of that tax would have been excluded or limited.

76Let us suppose, then, that W had, like the other persons holding shares in the subsidiaries, paid its own contributions in cash, thereby financing the acquisition of goods and services to be carried out directly by those subsidiaries. In this case also, the tax paid by the subsidiaries on the goods and services acquired would not be deductible, or not in its entirety, by reason of the fact that they carried out predominantly exempt activities.

77In the light of the above, and without prejudice to the final assessment of the national court, I consider that a transaction such as that at issue in the main proceedings is contrary to the objective of Articles 167 and 168 of the VAT Directive and, therefore, that the objective condition characterising the existence of an abuse of rights can be regarded as fulfilled.

2. On the subjective condition characterising an abuse of rights

78As regards the ‘subjective condition’ characterising the existence of an abuse of rights in relation to VAT, as stated above, according to the case-law of the Court, it must be apparent on the basis of a series of objective elements that the transactions are essentially aimed at obtaining a tax advantage.

79W has alleged a number of non-tax reasons – set out in point 30 above – that it believes justify the arrangement used for the transactions at issue in the main proceedings. Those reasons were endorsed by the national court at first instance, and, according to the order for reference, the judgment of that court on this point is binding on the Bundesfinanzhof (Federal Finance Court). That court therefore wonders whether the existence of non-tax reasons precludes a finding of an abuse of rights in a case such as that at issue in the main proceedings.

80In this respect, I emphasise that the case-law of the Court, despite using non-uniform wording, ³² does not require it to be demonstrated that the attainment of a tax advantage constitutes the sole objective of the transactions at issue. Although transactions that exclusively pursue that objective may satisfy the requirement resulting from that case-law, the Court has made it clear that there can also be a finding of an abusive practice when the accrual of a tax advantage constitutes the principal (but not exclusive) aim of the transactions at issue. ³³ In relation to direct taxes – where the prohibition on abuses of rights is governed by specific rules ³⁴ – the Court has asserted that a transaction based on several objectives, which may also include tax considerations, can constitute a valid commercial reason provided, however, that those considerations are not predominant in the context of the proposed transaction. ³⁵ It follows that the presence of commercial reasons outside the tax system does not in itself preclude the existence of an abuse of rights, provided that the predominant purpose of the transaction can be said to be that of obtaining a tax advantage.

81On that point, the Court has also held that the essential purpose of contested transactions can be identified as the obtaining of a tax advantage if these transactions are not carried out in the context of normal commercial operations ³⁶ and thus do not correspond with economic and commercial realities. ³⁷

82It is, of course, for the national court to determine whether that condition is met in the main proceedings by establishing the actual content and significance of the transactions. It must therefore carry out a careful assessment of the ‘economic reasons’ underlying the transactions entered into, to verify whether they are justifiable in objective terms, on the basis of common business practice, or whether they reflect economic ‘abnormalities’. In particular, the national court may take account of the potentially purely artificial nature of the transactions and the links of a legal, economic and/or personal nature between the operators involved in the plan to reduce the tax burden, ³⁸ those aspects being such as to demonstrate that the accrual of a tax advantage constitutes the principal aim pursued, notwithstanding the possible existence, in addition, of economic objectives arising from, for example, marketing, organisation or guarantee considerations. ³⁹

83On the other hand, I regard as irrelevant – for the purposes of identifying an abusive practice – the competitive advantage, a factor stressed in the second question asked by the Bundesfinanzhof (Federal Finance Court), enjoyed by structured transactions involving holding companies compared with those involving single-tier companies. Freedom of organisation may legitimately be exercised in order to obtain an advantage, including a tax advantage, over competing undertakings, provided that the conditions described above characterising an abusive practice are not met.

84In the light of the above, if, contrary to the view expressed in the preceding paragraphs, the Court wishes to answer the first question referred for a preliminary ruling in the affirmative, I consider that the second question referred should be answered as follows: ‘The fact that a managing holding is involved as an ‘intermediary’ in obtaining services for subsidiaries in such a way that it obtains services itself for which the subsidiaries would have no entitlement to deduction if the services were obtained directly, and provides those services to the subsidiaries in return for a share in their profit and, lastly, claims full deduction on the basis of the obtained input services on the grounds of its position as a managing holding, generates a tax advantage the grant of which is contrary to the objective pursued by the provisions of the VAT Directive on deduction. Such a transaction constitutes an abuse of rights, even if it can be justified by reasons extraneous to tax law, where it appears that the essential aim of the transaction is to obtain a tax advantage.’

V. Conclusions

Conclusion

85On the basis of all the points set out above, I propose that the Court’s answers to the questions referred for a preliminary ruling by the Bundesfinanzhof (Federal Finance Court, Germany) should be as follows:

Article 168(a) in conjunction with Article 167 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 managing holding that provides taxable output services to subsidiaries is not entitled to deduct the VAT paid for services that it obtains from third parties and provides to the subsidiaries in return for a share in the general profit, where the obtained input services are not directly and immediately linked to the holding’s own transactions but instead to the (largely) tax-exempt activities of the subsidiaries, those obtained input services cannot be included in the price of the taxable transactions (in the form of services rendered to the subsidiaries), and do not form part of the general cost components of the holding’s own economic activity.

The fact that a managing holding is involved as an ‘intermediary’ in obtaining services for subsidiaries in such a way that it obtains services itself for which the subsidiaries would have no entitlement to deduction if the services were obtained directly, and provides those services to the subsidiaries in return for a share in their profit and, lastly, claims full deduction on the basis of the obtained input services on the grounds of its position as a managing holding, generates a tax advantage the grant of which is contrary to the objective pursued by the provisions of the VAT Directive on deduction. Such a transaction constitutes an abuse of rights, even if it can be justified by reasons extraneous to tax law, where it appears that the essential aim of the transaction is to obtain a tax advantage.

¹ Original language: Italian.

² OJ 2006 L 347, p. 1.

³ BGBl. 2005 I, p. 386.

⁴ BGBl. 2002 I, p. 3866.

⁵ See, in relation to the right of deduction for holding companies, judgments of 29 October 2009, AB SKF (C‑29/08, EU:C:2009:665, paragraph 63 and the case-law cited), and of 1 October 2020, Vos Aannemingen (C‑405/19, EU:C:2020:785, paragraph 40). As regards the examination as to whether the conditions establishing an abusive practice are met, see judgments of 21 February 2006, Halifax and Others (C‑255/02, EU:C:2006:121, paragraphs 76 and 77), and of 17 December 2015, WebMindLicenses (C‑419/14, EU:C:2015:832, paragraph 34).

⁶ See, most recently, judgment of 18 November 2020, Syndicat CFTC (C‑463/19, EU:C:2020:932, paragraphs 29 and 67). To the same effect, see order of the President of the Court of Justice of 28 January 2015, Gimnasio Deportivo San Andrés (C‑688/13, EU:C:2015:46, paragraph 30 and the case-law cited), and judgment of 3 October 2019, Fonds du Logement de la Région de Bruxelles Capitale (C‑632/18, EU:C:2019:833, paragraph 48).

⁷ See judgment of 3 July 2019, The Chancellor, Masters and Scholars of the University of Cambridge (C‑316/18, EU:C:2019:559, paragraph 23 and the case-law cited).

⁸ See, to that effect, judgments of 8 November 2018, C&D Foods Acquisition (C‑502/17, EU:C:2018:888, paragraph 29), and of 29 October 2009, AB SKF (C‑29/08, EU:C:2009:665, paragraph 27).

⁹ See, to that effect, first, judgment of 20 June 1991, Polysar Investments Netherlands (C‑60/90, EU:C:1991:268, paragraphs 13 and 14). See also, in more recent case-law, judgments of 12 November 2020, Sonaecom (C‑42/19, EU:C:2020:913, paragraph 30); of 8 November 2018, C&D Foods Acquisition (C‑502/17, EU:C:2018:888, paragraph 30); of 5 July 2018, Marle Participations (C‑320/17, EU:C:2018:537, paragraphs 27 and 28); and of 17 October 2018, Ryanair (C‑249/17, EU:C:2018:834, paragraph 16).

¹⁰ See judgments of 12 November 2020, Sonaecom (C‑42/19, EU:C:2020:913, paragraph 31); of 5 July 2018, Marle Participations (C‑320/17, EU:C:2018:537, paragraph 29); and of 17 October 2018, Ryanair (C‑249/17, EU:C:2018:834, paragraph 17 and the case-law cited).

¹¹ See, to that effect, judgments of 12 November 2020, Sonaecom (C‑42/19, EU:C:2020:913, paragraph 32); of 27 September 2001, Cibo Participations (C‑16/00, EU:C:2001:495, paragraph 22); and of 13 March 2008, Securenta (C‑437/06, EU:C:2008:166, paragraph 31).

¹² See Opinion of Advocate General Mengozzi in Larentia + Minervaand Marenave Schiffahrt (C‑108/14 and C‑109/14, EU:C:2015:212, point 31).

¹³ See, to that effect, judgment of 5 July 2018, Marle Participations (C‑320/17, EU:C:2018:537, paragraph 32).

¹⁴ See, to that effect, judgment of 5 July 2018, Marle Participations (C‑320/17, EU:C:2018:537, paragraphs 30 and 31 and the case-law cited).

¹⁵ See judgments of 12 November 2020, Sonaecom (C‑42/19, EU:C:2020:913, paragraph 36), and of 17 October 2018, Ryanair (C‑249/17, EU:C:2018:834, paragraph 21 and the case-law cited). It should be noted that although these judgments refer to Article 17 of Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes – Common system of value added tax: uniform basis of assessment (OJ 1977 L 145, p. 1, ‘the Sixth Directive’), the relevant provisions of the VAT Directive have an essentially identical scope to those of the Sixth Directive. For this reason, it has been held that the Court’s case-law on the Sixth Directive is also relevant for the interpretation of the VAT Directive (see judgment of 3 July 2019, The Chancellor, Masters and Scholars of the University of Cambridge, C‑316/18, EU:C:2019:559, paragraph 17).

¹⁶ See judgments of 12 November 2020, Sonaecom (C‑42/19, EU:C:2020:913, paragraph 41), and of 17 October 2018, Ryanair (C‑249/17, EU:C:2018:834, paragraph 26 and the case-law cited).

¹⁷ See judgments of 12 November 2020, Sonaecom (C‑42/19, EU:C:2020:913, paragraph 42), and of 17 October 2018, Ryanair (C‑249/17, EU:C:2018:834, paragraph 27 and the case-law cited).

¹⁸ See judgment of 3 July 2019, The Chancellor, Masters and Scholars of the University of Cambridge (C‑316/18, EU:C:2019:559, paragraph 27).

¹⁹ See judgment of 29 October 2009, AB SKF (C‑29/08, EU:C:2009:665, paragraph 59 and the case-law cited).

²⁰ See, to that effect, judgment of 8 November 2018, C&D Foods Acquisition (C‑502/17, EU:C:2018:888, paragraph 37).

²¹ See judgments of 12 November 2020, Sonaecom (C‑42/19, EU:C:2020:913, paragraph 49); of 5 July 2018, Marle Participations (C‑320/17, EU:C:2018:537, paragraph 43 and the case-law cited); and of 16 July 2015, Larentia + MinervaandMarenave Schiffahrt (C‑108/14 and C‑109/14, EU:C:2015:496, paragraph 33).

²² See judgment of 12 November 2020, Sonaecom (C‑42/19, EU:C:2020:913, paragraphs 67 and 68).

²³ See judgment of 1 October 2020, Vos Aannemingen (C‑405/19, EU:C:2020:785, paragraph 45).

²⁴ See judgments of 21 February 2006, Halifax and Others (C‑255/02, EU:C:2006:121, paragraph 71), and of 29 April 2004, Gemeente Leusden and Holin Groep (C‑487/01 and C‑7/02, EU:C:2004:263, paragraph 76).

²⁵ See judgment of 22 May 2008, Ampliscientifica and Amplifin (C‑162/07, EU:C:2008:301, paragraph 28).

²⁶ Judgment of 22 November 2017, Cussens and Others (C‑251/16, EU:C:2017:881, paragraph 32).

²⁷ Judgments of 21 February 2006, Halifax and Others (C‑255/02, EU:C:2006:121, paragraph 86), and of 26 February 2019, T Danmark and Y Denmark (C‑116/16 and C‑117/16, EU:C:2019:135, paragraph 97).

²⁸ Judgments of 21 February 2006, Halifax and Others (C‑255/02, EU:C:2006:121, paragraphs 76 and 77), and of 17 December 2015, WebMindLicenses (C‑419/14, EU:C:2015:832, paragraph 34).

²⁹ Judgment of 21 February 2006, Halifax and Others (C‑255/02, EU:C:2006:121, paragraph 78).

³⁰ See, to that effect, judgments in Ampliscientifica and Amplifin (C‑162/07, EU:C:2008:301, paragraph 19), and in Skandia America Corp. (USA), filial Sverige (C‑7/13, EU:C:2014:2225, paragraph 29). See also Opinion of Advocate General Mengozzi in Larentia + Minerva and Marenave Schiffahrt (C‑108/14 and C‑109/14, EU:C:2015:212, points 46 to 50), in relation to the corresponding provisions of the Sixth Directive.

³¹ See also, to that effect, Communication from the Commission to the Council and the European Parliament on the VAT group option provided for in Article 11 of Council Directive 2006/112/EC on the common system of value added tax (COM(2009) 325 final, 2 July 2009, p. 11).

³² See, on this point, Opinion of Advocate General Bobek in Cussens and Others (C‑251/16, EU:C:2017:648, point 97).

³³ See judgments of 21 February 2008, Part Service (C‑425/06, EU:C:2008:108, paragraph 45), and of 22 November 2017, Cussens and Others (C‑251/16, EU:C:2017:881, paragraph 53).

³⁴ Without going through all the legislation introduced in this field at European level, we should mention Article 6 of Council Directive (EU) 2016/1164 of 12 July 2016 laying down rules against tax avoidance practices that directly affect the functioning of the internal market (OJ 2016 L 193, p. 1). According to that article, an abusive tax practice can be deemed to exist on condition that obtaining a tax advantage that defeats the object or purpose of the applicable tax law constitutes ‘one of the main purposes’ of the transaction. That transaction must, however, be ‘non-genuine’, and thus must not have been put into place ‘for valid commercial reasons which reflect economic reality’.

³⁵ See judgment of 10 November 2011, FOGGIA-Sociedade Gestora de Participações Sociais (C‑126/10, EU:C:2011:718, paragraph 35). That judgment concerns the specific rules intended to prevent abuses laid down in Article 11(1)(a) of Council Directive 90/434/EEC of 23 July 1990 on the common system of taxation applicable to mergers, divisions, transfers of assets and exchanges of shares concerning companies of different Member States (OJ 1990 L 225, p. 1).

³⁶ See judgment of 21 February 2006, Halifax and Others (C‑255/02, EU:C:2006:121, paragraph 69).

³⁷ See judgment of 20 June 2013, Newey (C‑653/11, EU:C:2013:409, paragraphs 44 and 45).

³⁸ See judgment of 21 February 2006, Halifax and Others (C‑255/02, EU:C:2006:121, paragraphs 76 and 81).

³⁹ Judgment of 21 February 2018, Part Service (C‑425/06, EU:C:2008:108, paragraph 62).