C-28/16 (MVM):

MVM is a State-owned commercial company active in the energy sector. MVM leases power plants and fibre optic networks as well. In addition MVM holds shares in a number of subsidiaries which generate or sell electricity.

In the case at hand MVM, acting in its capacity as a holding company, was responsible for the management of its group. However, MVM did not charge a management fee to these subsidiaries.

MVM purchased legal, management and public-relations services for the benefit of itself as well as for individual members of the group. MVM fully deducted the input VAT relating to those services.

The question arose whether the involvement of the holding company in the management of the group and its members, may be regarded as an economic activity, which subsequently should give rise to the right to deduct the input VAT for the purchased services.

The approach MVM took in this regard is also known as the concern-approach, meaning that the group as a whole solely carries out VAT taxable activities and that the input VAT on costs incurred by the holding company (i.e. MVM) should therefore not trigger additional costs.

The CJEU ruled that, in accordance with prior case law, the mere involvement of MVM acting as a holding company in the management of its group members, without charging a remuneration does not constitute an economic activity for VAT purposes. The ECJ thus ruled that MVM in principle does not have the right to deduct input VAT incurred on costs which directly relate to interference with the management of its subsidiaries for which no remuneration was charged.  

However, the CJEU did note that if the referring Court finds that certain of these costs relate to both economic and non-economic activities of MVM, could deduct the input VAT to the extent it relates to the VAT taxable economical activities.