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Morgan Stanley: VAT recovery and the ‘double layer’ test

Morgan Stanley: VAT recovery

We review an Advocate General’s opinion which adds significant complexity to VAT recovery by a branch supporting its foreign head office.

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The lack of clarity regarding the VAT recovery rules applicable to a branch supporting its head office has led to practical difficulties and the application of different deduction methods across the EU. On 3 October 2018, Advocate General Mengozzi handed down his opinion in Morgan Stanley (Case C-165/17). If the court agrees with him, the method used to determine the recoverable proportion of input tax may become severely complex in cross-border scenarios. Taxpayers operating in the financial and insurance sectors may need to consider their current cross-border intra-entity flows and anticipate potential risks regarding their VAT recovery position.

In an article for Tax Journal*, Philippe Gamito and Irina Maslova review an Advocate General’s opinion which adds significant complexity to VAT recovery by a branch supporting its foreign head office.

* First published in Tax Journal on 12 October 2018. Reproduced with permission

For further information, please contact: 

Philippe Gamito

Irina Maslova

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