Provisional text

delivered on 6 March 2025 (1)

Case C-808/23

Högkullen AB

Skatteverket

(Request for a preliminary ruling from the Högsta förvaltningsdomstol (Supreme Administrative Court, Sweden))

( Request for a preliminary ruling – Tax law – Common system of value added tax (VAT) – Directive 2006/112/EC – Article 72 – Open market value – Article 80 – Revaluation of the taxable amount – Holding company whose sole activity consists of supplying taxable services to its subsidiaries – Determination of the open market value – Prevention of tax evasion or avoidance )

1.In this request for a preliminary ruling, the Court of Justice is required to answer a question which would probably never have arisen but for its own case-law. More specifically, the ‘holding-company case law’ (2) provides that a parent company which takes the form of a holding company is only a ‘taxable person’ as defined under Article 9 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax (3) (‘the VAT Directive’) if it ‘manages’ its subsidiaries ‘for consideration’. According to that case-law, the ‘involvement in the management’ of its subsidiary of a holding company is to be considered an economic activity if it is carried out for consideration. That includes, inter alia, the supply of administrative, financial, commercial and technical services. (4) Corporate practice has responded to that case-law by means of a variety of organisational arrangements which now give rise to further questions.

2.In the present case, the controlling holding company of a property group ‘actively managed’ its subsidiaries in return for payment of consideration. In doing so, it supplied various services including, inter alia, company management or the provision of infrastructure. The holding company did not carry out any other activities. To enable the supply of those services, it incurred considerable expenditure, including long-term investments. In the year at issue, 2016, the holding company’s expenditure exceeded the income arising out of its activities for the subsidiaries many times over.

3.According to the case-law of the Court of Justice, that activity carried out by the holding company for consideration amounts to an economic activity which, in the absence of a tax exemption, is fully subject to VAT. By contrast, the activities of the subsidiaries in the present case are in part subject to VAT exemptions. Consequently, the subsidiaries cannot fully deduct the input VAT amounts paid in respect of their input services (which they have received from the holding company) from their VAT liability. The holding company, on the other hand, claimed the full input VAT deduction and paid the VAT relating to the services it had supplied for consideration. In so far as the purchase price and the resale price of those services are identical, the transaction will therefore be VAT-neutral within the group. If, however, the resale price charged to the subsidiaries is lower than the purchase price paid by the holding company, the group benefits from a VAT advantage.

4.The construction described above prompted the tax authority to re-evaluate the taxable amount for calculating the VAT payable in respect of the services supplied by the holding company. The basis for doing so lay in Article 80(1)(a) of the VAT Directive. That provision authorises Member States, in certain cases, to tax services rendered between affiliated companies not on the basis of the consideration actually paid, but rather on the basis of a fictitious value (referred to as the minimum taxable amount).

5.The tax authority takes the view that, in the present case, that fictitious value (the ‘open market value’ as defined in Article 72 of the VAT Directive) is to be determined on the basis of the holding company’s cost price. In view of the fact that the holding company had deducted all of its incurred input VAT amounts from its VAT liability, the Swedish tax authorities considered that the entirety of the holding company’s expenditure was to be applied as the taxable amount in respect of its output transactions.

6.In the present proceedings, the Court of Justice must now – as an indirect consequence of its ‘holding-company case-law’ – define the scope of the minimum taxable amount and clarify whether all of a taxable person’s expenditure can indeed be included in the calculation of the open market value.

II. Legislative framework

7.The EU legal framework consists of the following articles of the VAT Directive.

8.Article 73 of the VAT Directive lays down the principle that:

‘In respect of the supply of goods or services, other than as referred to in Articles 74 to 77, the taxable amount shall include everything which constitutes consideration obtained or to be obtained by the supplier, in return for the supply, from the customer or a third party, including subsidies directly linked to the price of the supply.’

9.Article 80(1)(a) of the VAT Directive provides, by way of exception:

‘1. In order to prevent tax evasion or avoidance, Member States may in any of the following cases take measures to ensure that, in respect of the supply of goods or services involving family or other close personal ties, management, ownership, membership, financial or legal ties as defined by the Member State, the taxable amount is to be the open market value:

(a) where the consideration is lower than the open market value and the recipient of the supply does not have a full right of deduction under Articles 167 to 171 and Articles 173 to 177’

10.Article 72 of the VAT Directive concerns the calculation of the open market value:

‘For the purposes of this Directive, “open market value” shall mean the full amount that, in order to obtain the goods or services in question at that time, a customer at the same marketing stage at which the supply of goods or services takes place, would have to pay, under conditions of fair competition, to a supplier at arm’s length within the territory of the Member State in which the supply is subject to tax.

Where no comparable supply of goods or services can be ascertained, “open market value” shall mean the following:

(1) in respect of goods, an amount that is not less than the purchase price of the goods or of similar goods or, in the absence of a purchase price, the cost price, determined at the time of supply;

(2) in respect of services, an amount that is not less than the full cost to the taxable person of providing the service.’

B. Swedish law

11.In Sweden, Articles 72, 73 and 80 of the VAT Directive have been transposed into national law by Paragraph 9(1) of Chapter 1 and Paragraphs 2, 3 and 3a of Chapter 7 of the Mervärdesskattelag (1994:200) (‘the Swedish Law on value added tax’). The new version of the Mervärdesskattelagen (2023:200), which has since entered into force, is not applicable to the present dispute.

12.The first subparagraph of Paragraph 9 of Chapter 1 of the Swedish Law on value added tax provides that, with regard to services, ‘open market value’ shall mean the full amount that a customer of a service, at the same marketing stage at which the supply of services takes place, would have to pay, at the time of the supply and under conditions of fair competition, to a supplier at arm’s length for such a service situated within the national territory. According to the second subparagraph, where no comparable supply of services can be ascertained, the open market value is an amount which is not less than the full cost to the taxable person of supplying the service.

13.It follows from Paragraphs 2 and 3 of Chapter 7 of the Swedish Law on value added tax that, as a general rule, the taxable amount is the consideration for goods or services.

14.In accordance with Paragraph 3a of Chapter 7 of the Swedish Law on value added tax, the taxable amount is the open market value where the consideration is lower than the open market value, the customer does not have a full right of deduction, the vendor and customer are connected to each other and the taxable person is not able credibly to establish that the consideration is in line with market conditions.

III. The facts of the case

15.Högkullen AB (‘the holding company’), a limited company incorporated under Swedish law, is the controlling parent company of a group. The group’s economic activity comprises the management of real estate through a total of 19 direct and indirect subsidiaries. The activities of the subsidiaries are in part tax-exempt and consequently the VAT relating to the subsidiary’s input services is in part excluded from right to deduct input VAT (Article 168 of the VAT Directive).

16.The holding company’s activities are limited to supplying intra-group services to the subsidiaries controlled by it in return for consideration. Those services comprise company management and financing, as well as real-estate management, IT and personnel management. The services are fully subject to VAT.

17.For its services, the holding company invoiced its subsidiaries for a total of approximately 2.3 million Swedish kronor (SEK) during the year at issue, 2016. The holding company stated that it had calculated that amount by applying the ‘cost-plus method’, that is to say, a method developed for the purposes of income tax law and, in particular, for transfer pricing. To that end, it had applied an allocation key, whereby a specific percentage of its costs for management, premises, telephone systems, information technology, corporate hospitality and travel was allocated to the output transactions. It stated, by contrast, that the shareholder costs as well as the costs associated with closing the accounts, audit, the general meeting, raising capital, a planned issuance of new shares and stock exchange listing were not linked to the output services. Consequently, the latter costs were not taken into account by the holding company when calculating the consideration for the services rendered.

18.In the year at issue, the holding company’s total expenditure amounted to approximately SEK 28 million. Approximately half of that expenditure related to input services subject to VAT. The remaining amount related to VAT-exempt input services and non-taxable transactions such as wage payments. The holding company deducted all incurred input VAT amounts from its VAT liability. Those deductions also covered input services which were not taken into account when calculating the consideration payable for the output services.

19.It is common ground that the holding company and its subsidiaries are connected to each other as provided for in Paragraph 3a of Chapter 7 of the Swedish Law on value added tax. Furthermore, no doubts have been expressed as to whether Articles 72, 73 and 80 of the VAT Directive were correctly transposed into Swedish law. The extent of the holding company’s right to deduct input VAT is also not the subject of dispute. The tax authority assumes that all input services subject to input VAT are to be allocated directly to the taxable output services provided to the subsidiaries.

20.The parties are therefore in dispute only as regards the question of whether the consideration paid by the subsidiaries, or a higher amount, should be taken as the taxable amount for the purposes of determining the holding company’s VAT liability.

21.The Skatteverk (‘Tax Agency’; ‘defendant’) is of the view that the consideration received by the holding company for its output services is lower than the open market value. The defendant therefore decided to re-evaluate the taxable amount in respect of the output services and to increase it in accordance with Paragraph 3a of Chapter 7 of the Swedish Law on value added tax. The defendant asserts that the holding company’s output transactions constitute a single supply. According to the defendant’s submissions, there was no comparable price for that service on the open market; consequently, the open market value would be at least equal to the full cost incurred in providing the service. Since the holding company had not provided any other services, the defendant regarded the total amount of its expenditure in the year at issue, namely SEK 28 million, as the taxable amount. The defendant calculated the VAT payable by the holding company on that basis.

22.The holding company brought an action contesting that order before the first instance court. That court set aside the order on the ground that not all of the holding company’s expenditure was attributable to the services it had provided to the subsidiaries. In particular, the court found that a large portion of the costs were accompanying expenses earmarked for a possible stock exchange listing. Those expenses were completely unrelated to the output transactions.

23.On an appeal lodged by the defendant, that decision was overturned. The order of the defendant was upheld on the ground that the holding company had fully deducted all of the input VAT amounts incurred. It had thus allocated all expenditure to its economic activity. Since the holding company’s economic activity was limited to management of the subsidiaries, all of its expenditure was to be taken into account for the purposes of determining the open market value. The holding company is now appealing against that decision.

24.The Högsta förvaltningsdomstol (Supreme Administrative Court, Sweden) has doubts regarding the lawfulness of the defendant’s approach. It therefore stayed the proceedings and referred the following two questions to the Court of Justice for a preliminary ruling:

‘(1) When applying national provisions on the revaluation of the taxable amount, is it compatible with Articles 72 and 80 of the VAT Directive, where a parent company provides its subsidiaries with services of the kind at issue in the present case, always to regard those services as unique services whose open market value cannot be determined by means of a comparison such as that provided for in the first paragraph of Article 72?

(2) When applying national provisions on the revaluation of the taxable amount, is it compatible with Articles 72 and 80 of the VAT Directive to consider that the total expenditure of a parent company, including the costs of raising capital and shareholder costs, constitutes the cost incurred by the company in providing services to its subsidiaries, where the parent company’s sole activity consists of the active management of its subsidiaries and the parent company has deducted all the input VAT paid on its acquisitions?’

25.In the proceedings before the Court of Justice, the European Commission also submitted written observations in addition to those submitted by the holding company and the defendant. In accordance with Article 76(2) of the Rules of Procedure of the Court of Justice, the Court did not consider it necessary to hold a hearing.

26.The Tax Agency takes issue with the fact that the holding company claimed the full deduction of input VAT in respect of its input services (to the extent that they were subject to VAT), notwithstanding the fact that the group (more precisely, the subsidiaries controlled by the holding company) provides partially tax-exempt services to external parties.

27.The Tax Agency asserts that a sole trader with a comparable economic activity would be entitled to claim only a partial deduction of input VAT. If the group did not operate by means of a holding structure but rather as a sole trader, the input VAT deductible in respect of its own management costs would be determined on the basis of the output transactions of the sole trader. Any transactions exempted from tax on the basis of individual activities would then limit the input VAT deduction proportionately. In all other respects, however, the entitlement to deduct input VAT would still be retained, including in respect of the company management costs.

28.However, according to the case-law of the Court of Justice, that does not apply in the case of a holding company, because a holding company which receives only dividends does not, in principle, carry out an economic activity and is therefore not a taxable person. The Court of Justice stated that it would be otherwise (only) where the holding is accompanied by direct or indirect involvement in the management of the companies in which the holding has been acquired, without prejudice to the rights held by the holding company as shareholder.

29.The holding company case-law of the Court of Justice provides that, where no management services are provided to the subsidiaries for consideration, a holding company has no entitlement at all under Article 168 of the VAT Directive to deduct input VAT in respect of the company management costs.

30.It follows from that case-law that every holding company of a group which makes fully taxable or partially taxable transactions, must provide services for consideration to its subsidiaries if it wishes to neutralise the VAT burden on the group management costs by means of an input VAT deduction. Services for consideration are therefore ‘constructed’ between the holding company and the subsidiaries. An input VAT deduction based on the group’s output transactions thereby becomes almost impossible.

31.The case-law on holding companies was developed using the example of pure financial holding companies whose sole purpose is to acquire shares in other undertakings and which have no operating business of their own. Their sole income consists of dividends, which do not constitute remuneration for the economic use of property but are merely the result of ownership of a share.

32.It is true that a pure financial holding company which receives only dividends from various shareholdings is economically inactive. The situation is different, however, in the case of a controlling holding company which manages its controlled shareholdings. It has as its purpose not only the acquisition but also the management of those shareholdings. Such a holding company is not comparable to a mere shareholder. A justification is therefore required as to why it can be regarded as a taxable person only where it also supplies services for consideration to the subsidiaries. The current case-law provides no justification for that position and almost invites the creation of new organisational arrangements. That is also illustrated by the present case.

33.In the absence of that case-law, no separate fees would have to be charged at all for the ‘management of the shareholdings’ (under income tax law, a purely internal cost allocation would probably suffice) and the deduction of input VAT by the holding company would have to be granted only proportionately, on the basis of the taxable output transactions of its shareholdings. The questions referred for a preliminary ruling in the present case regarding the application of a fictitious taxable amount would therefore be superfluous. That would be a simple and probably preferable solution.

34.The principle of neutrality of legal form – which the Court of Justice recognises and emphasises – in fact suggests that, in both cases (sole trader with a number of business areas versus controlling shareholder of a group with a number of business areas covered by the subsidiaries), the expenditure for the management of the undertaking ought to be relieved of VAT in identical amounts. The sole trader is economically active directly and the controlling shareholder indirectly, that is to say through the subsidiaries which it controls. Where both undertakings exercise the same economic activity, neither the sole trader nor the controlling shareholder of a group should be compelled to conclude service contracts for consideration with ‘its’ undertaking in order to be able to deduct input VAT as a taxable person, such that the VAT is neutral for it.

35.Hence, if the Court of Justice were to recognise in the future that a controlling holding company carries out an indirect economic activity, even without providing services for consideration to its subsidiaries, and is thus a taxable person in that respect, many of the disputes relating thereto would no longer arise in the future. Otherwise, there will continue to be an incentive to provide artificial-seeming services for consideration within holding company based group structures. Disputes would therefore continue to arise in relation to either the amount of the holding company’s input VAT deduction, or – as in the present case – the level of the taxable amount in respect of the services provided to the subsidiaries. The latter poses particular challenges, since – as explained earlier in this Opinion under point 26 et seq. – it concerns solely the correct input VAT deduction by the holding company.

36.The first question referred for a preliminary ruling concerns the determination of the taxable amount. According to Article 73 of the VAT Directive, it is, in principle, the consideration obtained by the supplier that is the decisive factor in that respect. Article 80 provides that in order to prevent tax evasion or avoidance, Member States may – in certain situations involving close ties between the supplier and the recipient – determine that the open market value is the taxable amount. According to Article 72, the ‘open market value’ is the full amount that a customer at the same marketing stage would have paid for a comparable (in the present case) service. It is only in cases where no comparable service can be established that the full cost to the taxable person of providing the service is to be taken as the open market value.

37.For the purposes of establishing the open market value under Article 72 of the VAT Directive, the referring court is seeking to ascertain whether management services provided by a holding company to its subsidiaries constitute unique services for which it is necessary to establish one single open market value.

38.Accordingly, in order to answer that question, it must first be determined whether the holding company in the present case is supplying a single (unique) service or several services which must be assessed separately (see heading 1. below). Only then will it be possible to determine how the open market value is to be calculated (see heading 2. below).

The single nature of the service

Standard for the single nature of a bundle of services

39.The Court has held in settled case-law that for VAT purposes every service must normally be regarded as distinct and independent. That follows from the second subparagraph of Article 1(2) and Article 2 of the VAT Directive. That holds even where there are certain links between multiple supplies because they pursue a single economic aim.

40.However, that principle according to which every service is independent is not absolute. Transactions should not be artificially split, so as not to distort the functioning of the VAT system. The VAT treatment of bundles of supplies is thus caught in tension between the principle that supplies are independent, on the one hand, and the prohibition on the artificial splitting of single transactions, on the other. In that connection, the Court has developed two exceptions to the principle that a supply is independent, namely single complex supplies and dependent ancillary supplies.

No ancillary services and no single complex services

41.A service must be regarded as a dependent ancillary service to a principal service if it does not constitute for customers an end in itself but a means of better enjoying the principal service supplied. The referring court found that the holding company provided its subsidiaries with company management, financial, real-estate management, securities, IT and personnel management services. None of those services is, in relation to the others, a dependent ancillary service. That is because the specified services each have their own original character and none of the services is subordinate to another in terms of its purpose.

42.There is also no single complex service. Where there is a single complex service, multiple elements of the service form one sui generis service. That is the situation, where the service supplied by the taxable person consists of two or more elements or acts which are so closely linked that they form, objectively, a single, indivisible economic supply, which it would be artificial to consider separately. The Court determines whether that is the case by ascertaining the essential features or characteristic elements of the transaction from the perspective of the ‘typical consumer’.

43.It is not discernible that the elements of the service are indivisible in the present case. Rather, the services supplied by the holding company (company management, financing, as well as real-estate, IT and personnel management) are five different services, each with its own character. The situation would be no different if services of that nature were supplied in combination because their individual character would remain apparent. Therefore, according to the generally accepted view, it is not a unique sui generis service. The services provided by the holding company are also accessible separately. On the market, the services are provided, in each case, by specialist providers. There is no need to obtain such services in a bundled form.

44.It is true that the subsidiaries each paid a single price for the services. Although that evidence suggests, in principle, that there is a single complex service, it is nevertheless of secondary importance in cases of affiliated companies. Otherwise, the group would itself be able to influence the VAT assessment of the services by agreeing a single charge or multiple separate charges. The single charge does not therefore preclude a finding that the services are separate.

45.Against that background, the services provided by the holding company must – as the European Commission correctly emphasises – be assessed separately. According to the findings communicated by the referring court, five different services were provided to the holding company’s subsidiaries.

Determination of the open market value

46.The referring court is also seeking to ascertain whether the open market value of the holding company’s services is to be determined on the basis of a comparison price, in accordance with the first paragraph of Article 72 of the VAT Directive, or on the basis of the holding company’s expenditure, in accordance with subparagraph 2 of the second paragraph of Article 72 of that directive.

47.According to the wording of that provision, the determinative factor is whether a ‘comparable supply … of services can be ascertained’. It is only in cases where that is not possible that the holding company’s expenditure can be used to determine the open market value.

48.It is a matter for the referring court to determine whether comparison prices for the holding company’s services can be ascertained on the open market and, if so, the amount of those prices. Since the five services supplied by the holding company are to be assessed separately, it appears likely that comparison prices could be ascertained.

49.In so far as the holding company has purchased the services provided to its subsidiaries from arm’s length third parties, there is no apparent evidence to suggest that the consideration paid by the holding company should not be regarded as a comparison price. That is because there is a presumption that a price paid between third parties dealing at arm’s length corresponds to the market value of a service.

Conclusion on the first question referred for a preliminary ruling

50.The open market value must be determined separately, for each of the holding company’s individual services, on the basis of the comparison prices referred to in the first paragraph of Article 72 of the VAT Directive. In the present case, it cannot be concluded that the services at issue amount to an indivisible bundle of services for which no comparison price would be available.

In the alternative: On the second question referred for a preliminary ruling

51.By its second question, the referring court is seeking to ascertain how the ‘full cost to the taxable person of providing the service’, as specified in subparagraph 2 of the second paragraph of Article 72 of the VAT Directive is to be determined. In particular, the referring court is asking whether that can be achieved by adding together all of the expenditure incurred by a taxable person in cases where its output services are limited to the management of subsidiaries and it has deducted from its VAT liability all of the input VAT amounts paid in respect of its input services. In the present case, however, that question arises only if the conclusion can be reached that the services at issue amount to an indivisible bundle of services for which there is no comparison price. It is therefore answered only in the alternative.

Mandatory precondition laid down in Article 80 of the VAT Directive: Risk of tax evasion or avoidance

52.The application of the open market value presupposes, firstly, that the first sentence of Article 80(1) of the VAT Directive is relevant, in other words that there is a risk of tax evasion or avoidance. If that is not the case, Article 73 of that directive provides that the taxable amount corresponds to everything spent by the recipient of the service.

53.Since the holding company has received consideration from its subsidiaries in respect of its services, the value actually received will, in principle, be the taxable amount for VAT purposes pursuant to Article 73 of the VAT Directive. The level of the taxable amount is therefore not determined by the legislator, but is instead determined independently by the taxable person and the recipient of the service. The decisive factor is the amount which the recipient of the service must spend in order to receive the service. Whether that is above or below the market value is, in principle, irrelevant for the purposes of VAT law.

In that regard, the mere fact that the input VAT deducted in respect of the input services exceeds the tax liability arising from the output services is not by itself – as the holding company correctly emphasises in its written observations – an indication of tax evasion or avoidance. Even a sale of goods below the usual market price does not constitute a risk of loss of tax revenue, since – as the European Commission also correctly emphasises – the arm’s length principle is, in principle, irrelevant for VAT purposes (due to its nature as an indirect tax on consumption). A fortiori, it does not create a risk of tax evasion or avoidance. Ultimately, the recipient of the service (rather than the supplier) should, and will, be taxed on the basis of his, her or its expenditure for (rather than on the basis of the usual cost of) a consumer good (supply or service).

55.The fact that the supplier has not made a profit is also irrelevant for the purposes of VAT law (see only Article 9 of the VAT Directive: ‘economic activity, whatever the … results [of that activity]’). Hence, the risk which Article 80 of the VAT Directive seeks to combat cannot stem from the amount of the price and the tax revenue resulting therefrom. For the purposes of VAT law, a price between the taxable person and the service recipient which does not cover costs is therefore acceptable.

56.However, if the taxable person (holding company) and the service recipient (subsidiary) are affiliated companies, the setting of prices between them is open to question in terms of VAT law for a different reason. That is illustrated by the following examples, which are based on a VAT rate of 20%.

57.The holding company purchases a service from a third party for 120 (including VAT of 20) and sells it on to the subsidiary for consideration. The subsidiary is not entitled to deduct input VAT because it makes tax-exempt transactions. At a resale price of 120, the holding company’s input VAT deduction and tax liability balance each other out, to the effect that the subsidiary is charged VAT of 20. The subsidiary would be unable to neutralise the VAT in the absence of a right to deduct input VAT. Consequently, the group is subject to a non-deductible VAT of 20. The same result would also occur in the case of sole traders which, by reason of their tax-exempt transactions, are not entitled to deduct input VAT.

58.However, at a resale price of 60, the holding company would still be entitled to effect an input VAT deduction of 20, but would have a tax liability of only 10 (20/120 × 60), to the effect that the subsidiary would only be charged VAT in the amount of 10. Thereby, the group would have reduced by half the costs associated with the subsidiary not having the right to deduct input VAT. Consequently, there is an incentive as well as an ability for closely affiliated companies to agree upon a price lower than the purchase price in such situations. That would not be possible for a sole trader. The particular closeness between the supplier and the recipient of the service gives rise to a risk in relation to VAT law (creation of an unauthorised input tax deduction, in this case within the group) which Article 80 aims to counteract.

59.Accordingly, in the cases laid down in Article 80 of the VAT Directive, the Member States may, exceptionally, calculate the VAT not on the basis of the actual consideration, but rather on the basis of the higher open market value defined in Article 72. Article 80(1)(a) of the VAT Directive presupposes that a service is supplied between affiliated undertakings, that the recipient of the service does not have a full right of deduction and that there is a risk of tax evasion or avoidance. If those prerequisites are met, the open market value, as defined in Article 72, is compared with the actual consideration. If the consideration is lower than the open market value, the latter is taken as the taxable amount for VAT purposes.

60.It is common ground between the parties that the holding company and its subsidiaries are affiliated companies and that the service recipients (the subsidiaries) do not enjoy a full right of deduction. Accordingly, it is necessary to examine only whether and to what extent there is a risk of tax evasion or avoidance.

61.Tax evasion or avoidance is, however, precluded per se in certain circumstances. That is the case in so far as the situation established by the taxable person does not give rise to a risk of loss of tax revenue.

62.Where goods or services are supplied at an artificially low or high price between parties who both enjoy a full right of deduction of VAT, there cannot be any evasion or avoidance of tax at that stage. In such a case, it is (in principle) irrelevant to the amount of the group’s overall VAT burden whether the subsidiaries use external services directly or whether the holding company first purchases those services and then sells them on to the subsidiaries at a lower or higher price.

63.Similarly, intra-group services do not give rise to a risk of loss of tax revenue in cases where no VAT is incurred on the expenditure (for example, on the payment of wages) of the supplying company (the holding company). The decisive factor is that the holding company was not entitled to claim an input VAT deduction in that respect. To that extent, and contrary to the view apparently taken by the Swedish tax authorities, the partial exclusion of the recipient of its services (that is to say, the subsidiaries) from the right to deduct input VAT is of no consequence. It does not give rise to any unauthorised input VAT deduction within the group. A sole trader with comparable expenditure and a comparable economic activity would also be subject to the same amount of VAT as the group.

64.Accordingly, risk of loss of tax revenue arises if, first, the holding company purchases services subject to VAT, second, the subsidiaries are not entitled to effect a full input VAT deduction and, third, the holding company sells the purchased services on to the subsidiaries at a price below the purchase price it paid for them. If, in such a situation (in the context of the ‘management for consideration’ required by the Court of Justice), the holding company transfers its input services on to its subsidiaries at an artificially low price, the group can partially reduce the VAT burden ensuing from the subsidiaries’ lack of entitlement to deduct input VAT.

65.However, that is not possible if and to the extent that the holding company’s expenditure is not subject to VAT. In that respect, there is no risk of loss of tax revenue. That is so even if the recipients of the services (the subsidiaries) do not have a right to full deduction of input VAT. The fact that the service recipient’s entitlement to deduct input VAT is not relevant for the purposes of determining a risk of loss of tax revenue is already evident from the fact that that criterion is mentioned separately in Article 80(1)(a) of the VAT Directive. That criterion would be redundant if it also had to be examined concurrently when determining whether there was a risk of tax evasion or avoidance.

66.The legal relevance of the fact that the input services are subject to input VAT is also evident in the light of the first paragraph of Article 16 and Article 26(1)(a) of the VAT Directive. Specifically, those provisions also presuppose, as a prerequisite for the fiction that the services are supplied for consideration (and a concomitant increase in the taxable amount) that the input services transferred free of charge gave rise to a right of deduction of input VAT. Ultimately, both Article 80, read in conjunction with Article 72, and the first paragraph of Article 16 and Article 26(1)(a) of the VAT Directive are pursuing the same aim. That aim is to adjust input VAT deductions effected by persons supplying goods or services to third parties free of charge or in part free of charge.

67.Based on the findings communicated by the referring court, that means that Article 80(1)(a) of the VAT Directive can apply only to around half of the holding company’s output services (approximately SEK 14 million). That is because, although the holding company attributed, in economic terms, all of its expenditure to its output services, only around half of its expenditure was subject to VAT. That is therefore the maximum level at which there could be a risk of loss of tax revenue as contemplated in Article 80 of the VAT Directive.

The relevance of the holding company’s expenditure

68.In so far as Article 80 of the VAT Directive applies, the open market value of the services must be determined in accordance with Article 72 of that directive. According to the first paragraph of Article 72, the open market value primarily means the amount which a customer would normally have to pay for a comparable supply of goods or services. Only if the referring court concludes that no comparison price can be determined is the cost to the holding company of providing the service to be regarded as the open market value in accordance with subparagraph 2 of the second paragraph of Article 72 of the VAT Directive (see, in that regard, the comments already made in relation to the first question referred, under point 46 et seq.).

69.However, an automatic, blanket inclusion in the calculation of all expenditure incurred by the holding company during the calendar year in question, as was done by the defendant, would lead to incorrect results. The open market value must – as the Commission correctly emphasises – be calculated separately for each service and cannot therefore be determined on the basis of the total expenditure for a year. For example, costs of the future acquisition of a shareholding (or even a stock exchange listing of the holding company) bear no relation to the services provided to the current subsidiaries. It therefore follows that they also cannot affect the taxable amount in respect of those services.

70.It is also relevant that certain expenditure subject to input tax is amortised only over a longer period of time. It is therefore precisely in the case of major investments that input VAT surpluses are inherent in the system. For example, the construction of a data centre by the holding company, so that it could provide IT services to the subsidiaries in exchange for consideration, would result in high costs during the year of construction (with a high VAT burden) which the holding company could neutralise through the deduction of input VAT.

71.It would not reflect economic reality if the full amount of such investment costs were to be included, in the year of their payment, for the purposes of determining the open market value of a service, supplied in the same year, which was based on those investments. On the contrary, that expenditure must be allocated also to the services supplied in future years. Even though that aspect has not been directly reflected in the wording of Article 72 of the VAT Directive, it must nevertheless be taken into account in VAT law.

72.First, the Court of Justice has already expressly ruled that even a market price which is lower than its own costs does not justify the application of Article 80 of the VAT Directive. However, a market price also allocates long-term investment costs over a number of years. Second, that is apparent, for example, from Article 187 of the VAT Directive, which provides that input VAT deducted in respect of investment costs is not to be adjusted immediately in the event of a change in circumstances but rather over a period of a number of years. That assessment and the time periods mentioned in that provision – which the Member States can influence to some extent – may be applied by analogy in the present case. It therefore follows that the concept of costs, as referred to in subparagraph 2 of the first paragraph of Article 72 of the VAT Directive is to be the subject of a narrow interpretation in line with the objectives of subparagraph 2 of the second paragraph of Article 72 of the VAT Directive.

Conclusion in relation to the second question referred for a preliminary ruling

73.The answer to the second question referred must therefore be (in the alternative) that the open market value, as provided for under Article 80, read in conjunction with Article 72, of the VAT Directive, for intra-group management services cannot be determined by means of a blanket addition of all the expenditure incurred by a holding company during a given calendar year. On the contrary, only the expenditure subject to VAT is to be taken into account. In that regard, it should be noted that the expenditure must be allocated to the respective output services. Consequently, costs for capital goods can, at most, be taken into account on a pro rata basis during the year in which they are incurred.

Conclusion

74.I therefore propose that the questions referred for a preliminary ruling by the Högsta förvaltningsdomstol (Supreme Administrative Court, Sweden) be answered as follows:

Article 72 and 80 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax must be interpreted as meaning that the various management services (in the present case: company management and financing services, as well as real estate, IT and personnel management services), provided by a managing holding company to its subsidiaries, are by no means always unique services for which it is impossible from the outset to determine a comparison value for the purposes of the first paragraph of Article 72 of that directive.

Original language: German.

Fundamental judgment of 20 June 1991, Polysar Investments Netherlands (C‑60/90, EU:C:1991:268, paragraph 13); see also judgments of 8 September 2022, Finanzamt R (Deduction of VAT linked to a shareholder contribution) (C‑98/21, EU:C:2022:645, paragraph 41 et seq.); of 8 November 2018, C&D Foods Acquisition (C‑502/17, EU:C:2018:888, paragraph 30 et seq.); and of 17 October 2018, Ryanair (C‑249/17, EU:C:2018:834, paragraph 16 et seq.).

OJ 2006 L 347, p. 1 in the version applicable in the period at issue.

According to the judgment of 5 July 2018, Marle Participations (C‑320/17, EU:C:2018:537, paragraph 45), the letting of a building also falls within the concept of management of a holding.

Fundamental judgment of 20 June 1991, Polysar Investments Netherlands (C‑60/90, EU:C:1991:268, paragraph 13); see also judgments of 8 September 2022, Finanzamt R (Deduction of VAT linked to a shareholder contribution) (C‑98/21, EU:C:2022:645, paragraph 41 et seq.); of 8 November 2018, C&D Foods Acquisition (C‑502/17, EU:C:2018:888, paragraph 30 et seq.); and of 17 October 2018, Ryanair (C‑249/17, EU:C:2018:834, paragraph 16 et seq.).

Judgment of 20 June 1991, Polysar Investments Netherlands (C‑60/90, EU:C:1991:268, paragraphs 13 and 14).

See, in relation to tax exemptions only: judgments of 28 June 2007, <i>JP Morgan Fleming Claverhouse Investment Trust and The Association of Investment Trust Companies</i> (C‑363/05, EU:C:2007:391, paragraph 26); of 4 May 2006, <i>Abbey National</i> (C‑169/04, EU:C:2006:289, paragraph 53); of 3 April 2003, <i>Hoffmann</i> (C‑144/00, EU:C:2003:192, paragraph 24); of 10 September 2002, <i>Kügler</i> (C‑141/00, EU:C:2002:473, paragraph 30); and of 7 September 1999, <i>Gregg</i> (C‑216/97, EU:C:1999:390, paragraph 20).

8See my Opinion in <i>Sonaecom</i> (C‑42/19, EU:C:2020:378, point 47).

9See, recently, in the judgment of 8 September 2022, <i>Finanzamt R (Deduction of VAT linked to a shareholder contribution)</i> (C‑98/21, EU:C:2022:645).

10Judgments of 2 July 2020, <i>Blackrock Investment Management (UK)</i> (C‑231/19, EU:C:2020:513, paragraph 23); of 18 January 2018, <i>Stadion Amsterdam</i> (C‑463/16, EU:C:2018:22, paragraph 22); and of 10 March 2011, <i>Bog and Others</i> (C‑497/09, C‑499/09, C‑501/09 and C‑502/09, EU:C:2011:135, paragraph 53).

11See my Opinion in <i>Frenetikexito</i> (C‑581/19, EU:C:2020:855, point 16 and the case-law cited) therein.

12See my Opinion in <i>Frenetikexito</i> (C‑581/19, EU:C:2020:855, point 18); see judgment of 4 September 2019, <i>KPC Herning</i> (C‑71/18, EU:C:2019:660, paragraph 44); and also, to that effect, judgment of 17 January 2013, <i>BGŻ Leasing</i> (C‑224/11, EU:C:2013:15, paragraph 42).

13Judgments of 2 July 2020, <i>Blackrock Investment Management (UK)</i> (C‑231/19, EU:C:2020:513, paragraph 23); of 18 January 2018, <i>Stadion Amsterdam</i> (C‑463/16, EU:C:2018:22, paragraph 22); of 16 April 2015, <i>Wojskowa Agencja Mieszkaniowa w Warszawie</i> (C‑42/14, EU:C:2015:229, paragraph 44); and of 10 March 2011, <i>Bog and Others</i> (C‑497/09, C‑499/09, C‑501/09 and C‑502/09, EU:C:2011:135, paragraph 53); and of 25 February 1999, <i>CPP</i> (C‑349/96, EU:C:1999:93, paragraph 29).

14See my Opinion in <i>Frenetikexito</i> (C‑581/19, EU:C:2020:855, point 20).

15Judgments of 29 March 2007, <i>Aktiebolaget NN</i> (C‑111/05, EU:C:2007:195, paragraph 22); and of 27 October 2005, <i>Levob Verzekeringen and OV Bank</i> (C‑41/04, EU:C:2005:649, paragraph 20).

16Judgments of 18 January 2018, <i>Stadion Amsterdam</i> (C‑463/16, EU:C:2018:22, paragraph 30); of 27 September 2012, <i>Field Fisher Waterhouse</i> (C‑392/11, EU:C:2012:597, paragraph 18); and of 25 February 1999, <i>CPP</i> (C‑349/96, EU:C:1999:93, paragraph 29). By contrast, the judgments always use the same term in the original (that is to say, in the French language version): ‘<i>éléments caractéristiques</i>’.

17Judgments of 19 July 2012, <i>Deutsche Bank</i> (C‑44/11, EU:C:2012:484, paragraph 21); of 2 December 2010, <i>Everything Everywhere</i> (C‑276/09, EU:C:2010:730, paragraph 26); and of 25 February 1999, <i>CPP</i> (C‑349/96, EU:C:1999:93, paragraph 29).

18See also, in that regard, my Opinion in <i>Frenetikexito</i> (C‑581/19, EU:C:2020:855, point 22).

19Order of 19 January 2012, <i>Purple Parking and Airparks Services</i> (C‑117/11, not published, EU:C:2012:29, paragraph 35), and judgment of 25 February 1999, <i>CPP</i> (C‑349/96, EU:C:1999:93, paragraph 31).

20Judgment of 26 April 2012, <i>Balkan and Sea Properties </i><i>and Provadinvest</i> (C‑621/10 and C‑129/11, EU:C:2012:248, paragraph 43 and the case-law cited therein).

21That is also consistent with the settled case-law of the Court of Justice – see only judgments of 17 October 2018, <i>Ryanair</i> (C‑249/17, EU:C:2018:834, paragraph 24 et seq.), and of 29 May 1997, <i>Skripalle</i> (C‑63/96, EU:C:1997:263, paragraph 26).

22On the exceptional nature of Article 80, see, expressly, judgment of 26 April 2012, <i>Balkan and Sea Properties </i><i>and Provadinvest</i> (C‑621/10 and C‑129/11, EU:C:2012:248, paragraph 45). On the exceptional nature in the context of the predecessor provision, see judgment of 29 May 1997, <i>Skripalle</i> (C‑63/96, EU:C:1997:263, paragraph 24).

23Judgment of 26 April 2012, <i>Balkan and Sea Properties and Provadinvest</i> (C‑621/10 and C‑129/11, EU:C:2012:248, paragraph 47).

24An exception applies for the acquisition of assets whose subsequent use could result in an adjustment having to be made to the input VAT deduction in accordance with Article 184 et seq. of the VAT Directive.

25See also, in relation to that logic, judgment of 29 May 1997, <i>Skripalle</i> (C‑63/96, EU:C:1997:263, paragraph 29).

26Judgment of 29 May 1997, <i>Skripalle</i> (C‑63/96, EU:C:1997:263, paragraph 26) – still in relation to the predecessor provision.

27See also, in that regard, judgment of 14 September 2006, <i>Wollny</i> (C‑72/05, EU:C:2006:573, paragraph 24 et seq.).

28Judgments of 19 July 2012, <i>Deutsche Bank</i> (C‑44/11, EU:C:2012:484, paragraph 21); of 2 December 2010, <i>Everything Everywhere</i> (C‑276/09, EU:C:2010:730, paragraph 26); and of 25 February 1999, <i>CPP</i> (C‑349/96, EU:C:1999:93, paragraph 29).

29See also, in that regard, my Opinion in <i>Frenetikexito</i> (C‑581/19, EU:C:2020:855, point 22).