The Distinction between Direct and General Costs with Regard to the Deduction of Input VAT – The Case of Acquisition, Holding and Sale of Shares

In revealing the conditions for the deduction of input VAT, the essential questions concern the nature of the so-called ''direct and immediate link'' test and thus also the criteria for the important distinction between direct costs and general costs. The ''direct and immediate link'' test is of general importance to all types of costs, but judged from the case law of the ECJ it has especially materialized itself when it comes to costs related to the acquisition, holding or sales of shares. The purpose of this article is therefore twofold. On the one hand it deals with the difficult question of distinguishing between direct and general costs. On the other hand the aim is to describe and analyse the law as it stands regarding the treatment of shares in the EU VAT system, with a special focus on the right to deduct input VAT on costs relating to transactions in shares. As a part of this analysis the aim is also to pinpoint questions regarding transactions in shares that are still unanswered by the ECJ.