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C&D Foods: the Good, the Bad and the Ugly

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In the recent case of C&D Foods Acquisition ApS (Case C-502/17) the CJEU has ruled that there should be no deduction of input tax following an aborted sale of shares in a group subsidiary given the intention to use the proceeds to pay down debt. The CJEU found the aborted sale was outside the scope of VAT as the purpose meant there was an insufficient link to the overall economic activity of the taxpayer. As paying down debt is a common business activity the decision has raised concerns that VAT recovery could now be blocked in more instances than seems appropriate. To improve one’s chances of recovery any VAT incurred should be correctly charged to the right entity; appropriate documentation should be kept to evidence the intended links to economic activity and taxable supplies. Consideration should be given to the stated intentions of the parties and...

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