- When the Tax Authorities agreed to the VAT liable capacity of a company intending to start an economic activity giving rise to taxable operations, the order of a profitability survey for the contemplated activity may be considered as an economic activity according to this article even though the aim of this survey is to examine to which extent the contemplated activity is profitable;
- and that, except in the case of fraudulent or excessive situations, the VAT liable capacity may not be withheld to this company with a retroactive effect insofar as, in view of this survey, it has been decided not to start the operational phase and to liquidate the company so that the contemplated economic activity did not give rise to taxable operations (CJCE, February 29, 1996, aff. 110/94, Intercommunale voor zeewaterontzilting (INZO), RJF 5/96, no.690).
In this matter, the Belgian Tax Authorities wanted to retroactively challenge the refunds of the tax burdening its first investment expenses obtained by the company.
According to the High Court, and although the preliminary activity, which had given rise to the disputed deduction rights, finally did not give rise to any economic activity, the VAT neutrality principle is contrary to the reconsideration by the Tax Authorities of the tax liable status that it granted to the involved company. However, the Tax Authorities put aside the case of fraudulent or excessive situations which would then hinder the final obtaining of the liable capacity.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be brought about your specific circumstances.
For additional information contact Claire Acard on 33/(1)/55 61 10 10, Lionel Benant on 33/188.8.131.52, Joel Fischer on 33/184.108.40.206, or Laurent Borey on 33/(1).55 61 10 10 or enter text search: "ARCHIBALD ANDERSEN Profile".
The members of ARCHIBALD ANDERSEN Association d'Avocats (S.G. Archibald and Arthur Andersen International) are registered with the Hauts-de-Seine Bar and the Lyon Bar.