The Advocate General at the Supreme Court, Ms. M.E. van Hilten, recently issued her Opinion in the PPG Holding BV (“PPG”) case in which she concluded that PPG could deduct the VAT on the expenses related to its own pension fund.
PPG offers a defined benefit pension plan to its employees, whereby pension assets are placed in a separate pension fund. PPG engages various service providers to administer and manage the pensions and deducts the VAT charged on the invoiced expenses.
The dispute between PPG and the Dutch tax authorities centered on whether PPG should have deducted this VAT. The Advocate General at the Supreme Court, Ms. M.E. van Hilten, recently concluded that PPG can deduct this VAT. A judgment by the Supreme Court is now pending.
2. Opinion issued by Advocate General to the Supreme Court
Advocate General Van Hilten is thus following the position taken by PPG, i.e. that the expenses PPG incurs with regard to its pension fund are general expenses. On this point, Advocate General Van Hilten also confirmed the judgment by the Court of Appeals Arnhem-Leeuwarden, which was rendered after a preliminary ruling from the the Court of Justice of the European Union (CJEU). The Court of Appeals Arnhem-Leeuwarden concluded that it was plausible that general expenses were involved because all the expenses incurred, which related to the employees, are part of the cost of the goods and services supplied by PPG and these costs are directly and immediately linked to the economic activities performed by PPG.
Advocate General Van Hilten also followed the conclusion reached by the Court of Appeals Arnhem-Leeuwarden with regard to the following point. After the preliminary ruling from the CJEU, the Dutch tax authorities argued that VAT was payable by PPG because PPG had supplied the engaged services to its pension fund for a payment in kind. This position does not directly relate to the disputed entitlement of PPG to deduct VAT. Advocate General Van Hilten therefore concluded that the Dutch tax authorities had presented this argument too late in the proceedings. In her opinion, in the interests of due process this argument does therefore not have to be dealt with further.
Advocate General Van Hilten further concluded that PPG is not subject to a deduction limitation by virtue of the VAT Deduction Exclusion Decree (Besluit uitsluiting aftrek omzetbelasting 1968; “BUA”). According to the Advocate General, the PPG pension fund is not receiving a gift or promotional business gift from PPG as a result of PPG bearing the expenses in question. She also believes that this does not involve a staff benefit, because the business expenses involved do not serve any private purpose (as is the case with a payroll administration).
3. What are your options?
This Opinion is especially relevant to situations where an employer bears or is considering bearing certain expenses related to a pension plan of a pension fund. The tax advisors of Meijburg & Co’s Indirect Tax Financial Services Group would be pleased to discuss the impact of this Opinion. Feel free to contact one of these tax advisors or your regular contact at Meijburg & Co for more information.