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Right to deduct value added tax on expert services related to a corporate acquisition

Supreme Administrative Court of Appeal in Finland, KHO:2025:61

A Ltd was established in spring 2018 as the parent company in connection with the group’s ownership arrangement. In connection with the corporate restructuring, A Ltd acquired significant expert services from several operators. The services related to, among other things, the acquisition of shares, due diligence reports, the planning of financing and incentive arrangements, and notifications of corporate acquisitions to the competition authorities.

The Tax Administration considered that a large part of the services were related to the interests of private equity investors and not to A Ltd’s own VAT-liable business activities.
The Board of Adjustment and the Administrative Court considered that some of the services purchased were related to A Ltd’s taxable business activities.

The Supreme Administrative Court overturned the previous decisions. The case was referred back to the Tax Administration for reconsideration.

The Supreme Administrative Court strongly emphasized the obvious fact that the right to deduct VAT must be assessed carefully on the basis of how the various services relate to the taxpayer’s own taxable business activities.

Purchased services can be divided into two categories: some may serve the company’s own taxable business and thus be deductible, while others may be related to the owners’ investment activities and therefore not be deductible for A Ltd. For example, according to the Supreme Administrative Court, some due diligence reports and services related to competition authority notifications and founding documents may be deductible. Closing arrangements and services related to management incentive schemes and financing may also be partially deductible for A Ltd.

The Supreme Administrative Court stated that the taxable person has the burden of proof and must be able to specify which part of the costs is related to its own taxable business activities. The decision emphasizes that VAT deductions for expert services acquired in connection with corporate acquisitions and group arrangements require a detailed analysis of the content and benefits of the services. The deduction can only be applied to the portion of the costs that are actually related to the company’s own taxable business activities – not to the interests of capital investors or owners.