VAT Deduction: The Relevance of Being ‘The Recipient’ of a Supply and the Use of the Supply

Abstract

In this article, the author scrutinizes the current state of CJEU case law about VAT deduction on the purchase of goods and services by businesses, where third parties (also) benefit from these purchases. He also discusses case law about the VAT consequences of business funding transactions between two unrelated parties, where they have a financial interest in funding those transactions because they can lead to, for example, an increase of the turnover generated with their own taxed activities. The author comes to the conclusion that under the current provisions of the EU VAT Directive and CJEU case law, VAT deduction is not always allowed where, based on the principles of neutrality and economic reality, it should. He also offers a suggestion for adjusting the current rules in order to solve the issues that were highlighted in this article. EU VAT, Deduction, Benefit, Third-party-payments, Economic activities, Neutrality, Business promotions, Necessary costs