This article provides a brief insight into various topics. As a starting point, it describes which transactions form an economic activity for value-added tax (VAT) and are therefore within the scope of VAT. This is then put into the context of the economic reality of a business, whereby is assessed how turnover should be classified and what the effect is for VAT of such classification. In a nutshell, classification as usual turnover leads to deduction of VAT based on the general deduction rules. The classification as unusual turnover should not have any impact on the deduction of a company. Detailed guidance and the relevant ECJ case law on how to classify turnover are provided in this article. The final section of this article describes what the VAT treatment is of the sales of shares in the context of classification of turnover as well as the related consequences for the deduction.
EC Tax Review