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Sale of Subsidiary and Deduction for Input VAT on Consultancy Costs

October 2010 - Tax & Private Client. Legal Developments by Delphi.

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The Administrative Court of Appeal in the so-called SKF case refused a deduction for input VAT on certain consultancy costs incurred in conjunction with disposal of a subsidiary. The case is particularly interesting for companies which procure services in conjunction with so-called “enveloping of properties” and for advisors in such transactions.

Unfortunately the judgment means to some extent that it may be deemed to be uncertain as to which extent consultancy costs can be deducted for VAT in conjunction with enveloping of properties prior to the sale of a subsidiary. However, one can draw certain conclusions from the judgment and the ratio. Despite everything, the good news is that the case, in our opinion, opens up opportunities to appeal previous negative judgments in certain cases. Additionally, one can gather some guidance from the judgment regarding the issue of evidence in the cases where deduction for input VAT should actually be permitted.


Delphi has expert knowledge in all areas of commercial law. An important part is Corporate Finance, with a large amount of domestic and cross border mergers & acquisitions and an extensive Banking, Finance and Capital Markets practice. The firm has also distinguished itself particularly within high-technology oriented legal areas such as IT, Telecommunications, Intellectual Property and Life Science.