Court of Justice 12 February 2009, C-29/08 (Skatteverket v AB SKF.)

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In this Advocate-General's Opinion on a preliminary reference from the Swedish Supreme Administrative Court (Regeringsrätten), the central legal issues are whether a parent company's disposal of its entire shareholding in a subsidiary and a controlled company—where it had been actively involved in management by providing VAT-taxable services—constitutes an economic activity within the scope of the Sixth Directive (77/388/EEC) and Directive 2006/112/EC, and whether such disposal is exempt from VAT under Article 13B(d)(5) of the Sixth Directive and Article 135(1)(f) of Directive 2006/112. The Advocate-General opines that such a disposal does constitute an economic activity falling within the scope of both Directives, and that it is covered by the VAT exemption for transactions in shares, with the consequence that input VAT on services directly and immediately linked to the disposal (valuation, negotiation assistance, and legal advice) is not deductible, even where the disposal serves the broader purpose of restructuring the group's taxable activities. The Advocate-General further opines that the right to deduct as general overheads is unavailable where the input services have a direct and immediate link to an exempt output transaction, and that carrying out the disposal in successive stages does not alter this analysis.AI