1. Case C-29/08 Skatteverket v. AB SKF - What did the court mean? Mattias Fri Disclaimer The document is not comprehensive and should not be used for purposes other than as a basis for discussion. The purpose of this document is to provide a summary and provide a basis for further discussion. Further investigation into the tax, accounting and civil aspects of the content of this hand is necessary before any implementation Independent tax advice

2. Purpose of presentation  Analyse the ECJ decision  Present and analyse the aftercoming decision by the referring national Court, the Swedish Supreme Administrative Court  Is input VAT related to share of shares deductable in European VAT today? Discussion based on the questionnaire. 2015-05-232DISKUSSIONSUNDERLAG

3. Background  When is there a right to deduct input VAT on costs related to a parent company’s disposal of shares in a wholly-owned company?  Case C-29/08 Skatteverket v. AB SKF  RÅ 2010 ref 56 (decision by the referring Swedish Supreme Administrative Court) 3

4. Questions referred to the ECJ 1. Does a disposal of shares in a wholly-owned company fall inside the scope of VAT? 2. If yes, is the disposal of shares in a wholly-owned company exempt from VAT according to Article 135(1)(f) of the VAT Directive (2006/112/EC) (transactions in shares)? 3. Regardless of the answer to questions 1 and 2: is there a right to deduction of input VAT on the input services due to the fact that the costs are part of the overhead costs for the managing of the parent company’s business? 4. Does it matter if the disposal is made through successive transactions? 4

5. Case C-29/08 Skatteverket v. AB SKF 1. A disposal of shares falls within the scope of VAT as an economic activity if it is a direct, permanent and necessary extension of the taxable activity of the taxable person and to the extent such a disposal is not regarded as an equivalent to a transfer of a going concern. 2. A disposal of shares is exempt from VAT. 3. There is a right to deduction of input VAT if there is a direct and immediate link between the the costs associated with the input services and the overall economic activities of the taxable person. National courts thus have to determine whether the costs incurred are: likely to be incorporated in the price of the shares sold (link with the disposal, thus no right to deduction), or are only among the cost components of transactions within the scope of the taxable person’s economic activities (link with the overall economic activities, thus a right to deduction). 4. The conclusions above are not affected by the fact that the disposal of shares is carried out by way of several successive transactions. 5

6. RÅ 2010 ref 56 – the decision after the referral to ECJ  Not a unanimous Swedish Supreme Administrative Court (3-2).  Introductory question: is there a direct and immediate link between the costs associated with the input services and the actual disposal of shares? If yes; no right to deduction of input VAT. If no; how to determine the extension of the right to deduction? Should the taxpayer not be entitled to a deduction if it has not been shown that the input VAT on input services relates to the actual disposal of shares?  According to the Swedish Supreme Administrative Court there is no right to deduction of input VAT regarding: Assistance in negotiating with the purchasers of the shares Lawyer services related to the signing of contracts  According to the Swedish Supreme Administrative Court the right to deduction of input VAT could in this case not be determined regarding: Assessments, financial Due Diligence, consideration to actors on the market who had assisted in trying to find potential purchasers  What does it mean that the Swedish Supreme Administrative Court has ruled that specific acquisitions can result in the right to deduction of input VAT? 6

7. Disposal of shares – still a right to deduct input VAT?  Whether there is a right to deduct input VAT on input services related to a disposal of shares depends on the following: What is the aquisition a cost component of? Only a right to deduction if the aquisition is a cost component of taxable economic activities. and Is there a direct and immediate link between the input services and the taxable economic activities of the taxable person? Does the limitation in the right to deduct input VAT end where the exemption according to Article 135(1)(f) of the VAT Directive (2006/112/EC) starts?  The Swedish Tax Agency: In general of the opinion that there is no right to deduct input VAT on transaction related services in case of disposal of shares.  Disposal of shares is an economic activity to the extent that it is not regarded as an equivalent to a transfer of a going concern which is not an economic activity according to Article 19 in the VAT Directive.  The Swedish Tax Agency: a parent company’s disposal of shares in a wholly-owned company to which the parent compnay supplies services aimed for the entire company group cannot be regarded as a transfer of a going concern. 7

8. Pro rata  Can the disposal of shares have any impact on a company’s pro rata regarding the right to deduction, thus input VAT be general overhead costs for managing the business?  The Swedish Tax Agency: Disposal of shares can have an impact on a company’s pro rata.  Swedish case law: Unclear! 8

9. Disclaimer The document is not comprehensive and should not be used for purposes other than as a basis for discussion. The purpose of this document is to provide a summary and provide a basis for further discussion. Further investigation into the tax, accounting and civil aspects of the content of this hand is necessary before any implementation Thank You. Stockholm Smålandsgatan 16 Tel +46-8 528 01 250 stockholm@svalner.se Malmö Stadt Hamburgsgatan 1 Tel +46-40 660 99 80 malmo@svalner.se Independent tax advice