In Mercedes Benz Italia v Agenzia delle Entrate Direzione Provinciale Roma 3 (Case C-378/15) (14 December 2016) the CJEU found that Italian legislation transposed correctly the EU rules on the calculation of the partial exemption fraction.
Mercedes Benz was responsible for the marketing of the Daimler-Chrysler Group brands in Italy. In its VAT return for the 2004 tax year it had classified the granting of loans to its subsidiaries as ‘incidental’ to its taxable activities justifying the exclusion of the interest accrued on those loans from its partial exemption calculation. The Italian tax authorities considered however that the interest received on those loans had been improperly excluded from the denominator of the fraction used to establish the deductible proportion as the granting of those loans was one of Mercedes’ main activities since the accrued interest on those loans represented 71.64% of its total turnover.
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