Court of Justice 26 March 2015, C-108/14 and C-109/14 (Beteiligungsgesellschaft Larentia + Minerva mbH & Co. KG v Finanzamt Nordenham and Finanzamt Hamburg-Mitte v Marenave Schiffahrts AG.)

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In this Opinion in Joined Cases C-108/14 and C-109/14, Advocate General Mengozzi opines that expenditure connected with capital transactions incurred by a management holding company (one that involves itself in the management of its subsidiaries) has a direct and immediate link with that company's economic activity as a whole, such that input VAT on such expenditure should not be apportioned between economic and non-economic activities, with the proportion method under Article 17(5) of the Sixth VAT Directive applying only where the holding company effects both taxable and exempt transactions. The Advocate General further opines that the second subparagraph of Article 4(4) of the Sixth Directive precludes national legislation (such as the German 'Organschaft' regime under Paragraph 2(2) UStG) that restricts VAT group membership exclusively to legal persons, thereby excluding partnerships, unless such restriction is justified by the prevention of abusive practices or tax evasion in compliance with EU law and the principle of fiscal neutrality, and that a requirement of control and subordination between VAT group members may be compatible with that provision only if it is necessary and proportionate to those same objectives. The Advocate General concludes that the second subparagraph of Article 4(4) of the Sixth Directive does not have direct effect, given that the substantive condition of 'close' financial, economic, and organisational links requires national specification, but that national courts must interpret domestic legislation as far as possible in conformity with that provision.AI