VAT deduction | making goods available free of charge | Court of Justice C-475/23 - Voestalpine

In October 2024, the Court of Justice (ECJ) ruled in the Voestalpine case on the question whether a company is entitled to deduct VAT on the purchase of goods, even if the goods in question are made available free of charge to a service provider.

In this case, a company (Voestalpine) purchased a crane. Voestalpine reclaimed the VAT on this purchase from the local tax authorities. Voestalpine then made the crane available free of charge to a service provider, who needed the crane to carry out its activities for Voestalpine. These activities consisted of the processing of moulded parts, weighing more than 10 tonnes. Without the crane, the service provider would never have been able to carry out the activities for Voestalpine. The local tax authorities took the view that Voestalpine should not have reclaimed the VAT because the crane was made available free of charge to a service provider and was therefore not used for its own business activities.

The ECJ is of the opinion that Voestalpine should have been allowed to reclaim the VAT because the crane is a necessary part of its business process and without this crane its goods could never have been produced. Although this is not discussed further in the judgment, we assume that the costs of purchasing the crane are included in the prices that Voestalpine charges for its products.
The ECJ also states that it is not relevant that the service provider benefits from the fact that it was able to use the crane free of charge, which undoubtedly has an effect on the price that the service provider charges Voestalpine. This benefit, and any consequences thereof, is a discussion that must be held with the service provider. After all, it is clear to Voestalpine that the crane is a necessary part of its business process. This means that the right to deduct VAT is established. It is important that making the crane available does not go beyond what is necessary for Voestalpine's business process.

In the past, the ECJ has already made it clear that (under certain circumstances) VAT can also be deducted if an entrepreneur does not own the goods, but must necessarily incur the costs in order to be able to perform its own economic activities. This could be the situation, for example, in which the service provider must incur costs to keep the crane in operation. It must then be demonstrated that these costs are necessary in order to be able to (continue to) perform its own activities.

This ruling provides a welcome clarification of discussions that regularly have to be held in practice with the tax authorities if goods and/or services are not fully charged. We would be happy to tell you more about this if so desired.

If you have any questions about this topic or if you would like to discuss the topic further, please do not hesitate to contact us at info@vatpartners.com