Court of Justice 6 April 2017, C-132/16 (Direktor na Direktsia „Obzhalvane i danachno-osiguritelna praktika“ - Sofia v „Iberdrola Inmobiliaria Real Estate Investments“ EOOD.)

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Advocate General Kokott opines that Article 168(a) of Directive 2006/112/EC does not permit the deduction of input VAT for services supplied free of charge to a third party, even if motivated by business reasons, where a direct and immediate link exists between the input and a non-taxable output. The Opinion argues that a merely causal link to the taxable person's economic activity is insufficient for deduction if the service is directly allocated to a third party's own purposes, such as municipal infrastructure renovation. Furthermore, the Advocate General asserts that the specific accounting treatment of such costs under national law is irrelevant to the determination of the right to deduct under EU VAT law.AI