The European Court of Justice (ECJ)’s ruling in the SKF case is a milestone in the development of the doctrine on the VAT treatment of disposals of shares by a ‘controlling active parent company’, such as AB SKF. The first question in this case was whether the disposal of shares was an economic activity and if so, whether it constituted a VAT exempt supply of services. The second question was whether input VAT incurred on costs made in connection to a share disposal can be deducted. Although the ECJ ruled that the disposal of the shares was a VAT exempt supply of services, the ECJ created routes to deduct input VAT on costs related to the disposal of the shares. Focusing on the right to deduction of input VAT, the authors investigate the implications of the ECJ’s judgment and test whether the EC VAT Directive (ECVD) and settled ECJ case law provide solid legal arguments to validate both the outcome and the implications of the SKF case.

On 7 September 2014 the European Court of Justice delivered its landmark decision in the Skandia America Corporation case (C-7/13). The judgment deals with the Value Added Tax (VAT) treatment of services provided by a foreign head office to its fixed establishment, which is included in a VAT group. The case has a huge potential impact not only in the financial services sector, but in cross-border business in general. Now, almost two years after the decision was taken, the author reflects on the judgment, taking into account the views of various stakeholders. The different approaches of Member States will be outlined as well as the potential way forward.