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VAT review for March 2019

Nick Cronkshaw and Gary Barnett (Simmons & Simmons) provide your monthly review of the VAT developments that matter.

Overseas branch input VAT recovery

On 24 January 2019 the CJEU delivered its judgment in the Morgan Stanley case (Case C-165/17) on the correct method for calculating deductible branch input VAT where a branch incurs costs that are used in whole or part by its head office in another member state. The court has endorsed a complex approach which requires in cases where the input VAT is used for the transactions of the head office the amount of deductible input VAT to be determined based on the proportion of the taxable activities of the head office provided that those transactions would also be taxable in the member state where the branch is located. In essence therefore the test requires a ‘dual layer’ approach.

The case concerned Morgan Stanley Paris branch...

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