VAT Partially Deductible For Failed Biz Acquisition, ECJ Says

Law360 (November 13, 2020, 2:26 PM EST) -- A Portuguese company may deduct some of the €1 million ($1.2 million) it paid in value-added tax on services purchased to evaluate and finance an investment that didn't occur, the European Court of Justice ruled.

The company, Sonaecom SGPS SA, can deduct the VAT it paid on the evaluation services because the services were intended to help Sonaecom manage the company it planned to buy, and management is an economic activity that is taxable under VAT, the court said Thursday in a preliminary ruling to the Supreme Administrative Court of Portugal.

By contrast, Sonaecom wasn't allowed to deduct the VAT that was...

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