European Companies May Be Able To Recover VAT On Capital Raising Costs

by Robin Pilgrim, LawAndTax-News.com, London

04 March 2005

Commenting on an opinion delivered by the ECJ's Advocate General Jacobs last Thursday in relation to the case of Kretztechnik AG, UK professional services firm, Chiltern suggested that companies in the EU may now be able to recover in full VAT paid on costs associated with exchange listings and new share issues.

Although the opinion has not yet been ratified by the European Court of Justice, Chiltern recommended in a statement released this week that any company which has listed or issued new shares within the last three years should now submit claims to Customs & Excise for refunds of any VAT not previously recovered on the associated costs.

Although the case referred to in this instance deals exclusively with the issue of new shares and a simultaneous listing on the Frankfurt Neuer Markt stock exchange, experts at Chiltern believe that the decision has wider significance, as the analysis and reasoning of the Advocate General suggests quite strongly that any form of capital raising, whether equity or debt should also be viewed as a “non-supply” and so should again enable the recovery of VAT on associated costs, for example on corporate advisory fees.

Marc Welby, Chiltern's director of VAT services observed that: “If, as is usually the case, the European Court of Justice follows the Advocate General’s Opinion, this will represent a huge opportunity for companies to recover significant sums.”

He went on to add:

“We are already submitting claims for a number of our clients and would recommend that any company that has raised capital (be it by equity or debt) in the past three years should seriously consider claiming a VAT refund.”

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