Court of Justice (First Chamber) 26 May 2005, C-465/03 (Kretztechnik AG v Finanzamt Linz.)

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In Case C-465/03, the Court of Justice (First Chamber) held that a new share issue — whether or not connected with admission to a stock exchange — does not constitute a supply of goods or services for consideration within the scope of Article 2(1) of the Sixth VAT Directive (77/388/EEC), as a company issuing shares aims to raise capital rather than provide services, and the shareholder's payment represents an investment rather than consideration. The Court further held that, under Article 17(1) and (2) of the Sixth Directive, a taxable person is entitled to deduct in full the VAT charged on expenses incurred in connection with a share issue, on the basis that such costs form part of the company's overheads and have a direct and immediate link with its overall economic activity, provided that all transactions undertaken by that person in the context of its economic activity constitute taxed transactions. Where a taxable person effects both taxable and exempt transactions, only the proportion of VAT attributable to the taxable transactions is deductible pursuant to Article 17(5) of the Sixth Directive.AI