Chartered Tax Stage 3 Holding Companies Module - VAT Finbarr O’Connell 29th September 2012
Holding Companies Pure Holding Company Not engaged in economic activities ECJ – Wellcome Trust Case Mere holding of shares by a charitable trust
Holding Companies • PolysarInvestments Netherlands • Not a taxable person where only engaged in acquiring shares in subsidiaries • Sec 2 VATCA 2010 – not a taxable person
Holding Companies Pure Holding Company No entitlement to recover under Sec 59 VATCA 2010 Professional Fees – VAT is a cost Holding company acquiring/disposing of shares in subsidiaries Exempt Activity – Schedule 1 VATCA 2010 Transaction fees significant VAT cost
Holding Companies Status of the company Pure holding company? Any 'genuine' activity / turnover? Does it make supplies? Provision of management services to subsidiaries for a fee? Any employees? Are directors paid a salary
Holding Companies Section 59 VATCA 10 Recovery of VAT ? Costs related to “qualifying activities” Financial services provided outside the EU
Holding Companies Can VAT be recovered? Acquisition of shares (Cibo) Will supplies be made? % recovery? Issuing shares (Kretztechnik – TB 61 - 2005) Raising finance? For Vatable trading activities? Sale of shares (AB SKF) Link to supplies made?
VAT Groups • VAT Group means that a number of persons are treated as a single person for VAT purposes • One person known as the remitter is treated as if all transactions of the group were carried out by it • The group remitter files VAT returns on behalf of the group i.e. only one VAT return is submitted for the group for each taxable period.
VAT Groups • Group registration at discretion of Revenue • Revenue can impose compulsory group registration • Application is made on a Form VAT 52/VAT 53
VAT Groups • Per section 15 VATCA 2010 the following conditions must be met: • Two or more persons must be established in the State • One of the applicants must be a group member • Applicants must be closely bound by financial, economic & organisational links • Group registration is necessary/appropriate for efficient & effective administration
VAT Groups • Advantages of Group registration: • No VAT charged/no VAT invoices on inter-group transactions • Only one VAT return to be filed for each taxable period • VAT group registration may reduce irrecoverable VAT for the group where there is one VAT exempt person in the group but a VAT exempt member may dilute input VAT recovery for group as a whole
VAT Groups • Disadvantages of Group registration • Each person in the group is jointly and severally liable for non-compliance with VAT law
VAT Groups Sec 15 VATCA 10 Include Holding Co in group? Parent Holding Co Management Charges VAT @ 21% VAT Exempt Financial Institution
VAT Groups EU Commission does not agree that a non-taxable person should be allowed to join a group Infringement proceeding have been initiated against Ireland and other EU states but no outcome as of yet.