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Portugal Telecom SGPS SA v Fazenda Pública

In Portugal Telecom SGPS SA v Fazenda Pública (CJEU Case C-496/11) the Portuguese tax authority formed the opinion that a company (PT) was partly exempt and was only able to deduct 25% of the input tax it had incurred. PT appealed and the case was referred to the CJEU for a ruling on the interpretation of Article 17 of the EC Sixth Directive. The CJEU held that Article 17(5) ‘must be interpreted as meaning that a holding company such as that at issue in the main proceedings which in addition to its main activity of managing shares in companies in which it holds all or part of the share capital acquires goods and services which it subsequently invoices to those companies is authorised to deduct the amount of input VAT provided that the input services acquired have a direct and immediate link with the output economic...

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