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V3175-17 11 December 2017 · SG de Impuestos sobre el Consumo Criterion in force
IVA · sociedad holding pura

VAT cannot be deducted on pure holding company expenses, but is permitted via proportional allocation if other taxable activities exist

A holding company has enquired whether it can deduct VAT on legal costs (accounting, auditing) that cannot be attributed to any specific activity. The DGT has ruled that the mere holding of shares without management does not constitute an economic activity and therefore does not grant a right to deduction; however, if the company carries out other taxable activities, it may deduct these expenses using a reasonable and consistent allocation method.

The question raised

Deductibility of Value Added Tax quotas corresponding to the costs of legal obligations in Spain (such as the maintenance of accounting books, preparation, filing, and auditing of annual accounts...) that are not attributable to any of the activities carried out.

The DGT's ruling

The mere holding of shares without involvement in management does not constitute an economic activity and does not entitle one to a deduction. If the company also carries out taxable activities, expenses intended for both activities (dual entities) shall be deducted using a reasonable and homogeneous imputation criterion. Fees intended exclusively for non-taxable activities shall not be deductible in any proportion.

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