Denmark: Tax court rules on input VAT for diamond purchase
On April 25, the Danish Customs and Tax Administration posted online National Tax Court Decision No. SKM2025.221.LSR, which examined whether a holding company could claim input VAT on a diamond purchase intended for resale.
The case involved a private limited company engaged in owning and managing shares in subsidiaries and associated entities. The company acquired a diamond with the intent to sell it at a profit and subsequently claimed an input VAT deduction for the purchase.
Key findings from the National Tax Court included:
-
Non-economic activity:
The Court held that managing and holding shares did not qualify as an economic activity under the Danish VAT Act. -
Passive investments:
The taxpayer’s engagement in buying and selling investment assets, such as the diamond, was deemed a passive investment, not an economic activity. -
Denial of VAT deduction:
Based on the above conclusions, the Court found that the Tax Agency had correctly rejected the taxpayer’s input VAT deduction claim.
This decision reinforces the interpretation that passive investment transactions, including those made by holding companies, fall outside the scope of deductible VAT activities.
Source: skat.dk
