Think Your M&A VAT Is Safe? Think Again

For the past decade, we have enjoyed a relatively stable truce when it comes to the right to deduct input VAT on costs related to M&A activity. Since a pair of rulings by the Supreme Administrative Court ("SAC") in 2015, the position has been relatively clear: a pure holding company — one with no independent business activities — has no right to deduct input VAT on advisory services connected to acquisitions.

However, if the company does conduct business activities (such as providing management services to other companies in the group), then the VAT on M&A-related advisory services is considered to relate to that company's business. In that case, the VAT is deductible like any other input VAT connected to the company's operations.