The direct and immediate link with specialised services contracts as a measure for the right to deduct input VAT and the uncertainty in European tax law

Abstract

ABSTRACT The purpose of this paper is to reconstruct the meaning of the direct and immediate link test in light of the Court of Justice of the European Union (CJEU) case law in the purchase of specialised services. As will be shown, the CJEU adopted a broad method to recognise the right to deduct value added tax (VAT), allowing credits and, therefore, the right to deduct input VAT on the acquisition of goods and services indirectly related to the entrepreneurial activity of the taxable person. Nevertheless, the CJEU position states that the condition for granting the right of deduction is the analysis of the facts in each case, which generates uncertainty for the use of its case law as a source of law. Thus, the court should establish the general conditions regarding the right of deduction, in order to prevent wrongful usage of its case law and to avoid conflicting decisions.