Sveda case: Can a Baltic mythology park trigger an important EUCJ judgment on VAT deduction ?


The EUCJ is sometimes taking key positions in an improbable context. This is such a case !

The VAT deduction on the construction of a Baltic mythology recreational park has been rejected, as the park is only having limited VAT taxable output linked to its souvenir shop, but the access to the park, whose construction was 90% financed by the public, is free.

Contrary to that position, the EUCJ ruled that the free access to the park should not prevent the VAT deduction to the extent that the park attracted visitors and consequently clients for the souvenir shop.

This case is important as the EUCJ reaffirmed once more the central principle of VAT deduction for economic operators and took a broad approach on the direct link principle between costs and output transactions to justify the VAT deduction.

The not-for-profit and public sectors where a lot of activities are subsidised will be particularly interested by this case, but it’s impact will not be limited to them as there are various instances where we see VAT authorities trying to limit the VAT deduction when operations do not show a direct link with a VAT taxable output transaction…