Taxable persons who wish to carry out a zero-rated intra-Community supply of goods must provide proof thereof. Basically, the proof has to be formal in nature, specifically documentary and accounting evidence. In the Federal Fiscal Court’s view (judgment of 19 March 2015 – V R 14/14) evidence provided by a witness is accepted only in exceptional cases. Above all, this decision will have an impact on legal disputes.

The Federal Fiscal Court expressed doubts that a management holding company could be entitled to fully deduct input VAT. This is based on the assumption that the supplies purchased are partly connected with the acquisition and holding of shares in the subsidiary companies which is not to be regarded as an economic activity. This is contradicted by the ECJ. The ECJ acknowledges that there is a right to fully deduct input VAT if the holding is involved in the subsidiary’s management and is thus rendering supplies subject to VAT. The ECJ has repeatedly confirmed the principle that costs, which occurred in connection with the acquisition of shares in subsidiary companies, are always deemed to be part of the general expenses. It is therefore not necessary to prove that the expenses are part of the cost elements of the output transactions subject to VAT. The ECJ does not, however, comment on the Federal Fiscal Court’s questions on the calculation method as regards input VAT deduction in the case of mixed holdings.

According to German law, only legal persons may function as controlled companies. It is also required that the controlled company is subordinate to the controlling company in financial, economic and organizational terms. Now, the ECJ has turned the previous understanding upside down: National law does not correspond with Union law. Furthermore, the previous understanding of the existence of a VAT group by the Federal Fiscal Court was too restrictive. The most important question now is: How can entrepreneurs benefit from this new interpretation of the law?