Partial right of deduction of VAT

Case no. 101/2011
Judgment delivered on 17 May 2013.

Nordisk Factoring A/S
vs.
The Danish Ministry of Taxation

A factoring company engaged in factoring activities in the form of e.g. factoring lending wanted to offset its interest expenses to banks against its interest income from factoring clients. Such a net calculation would reduce the factoring company's VAT-free income and lead to an increase in the company's VAT deduction rate.

The Supreme Court stated that neither the Danish VAT Act, the underlying VAT directive nor the case law of the European Court of Justice provided a basis for such net calculation method. Nor could the factoring company rely on the Danish tax authorities' (SKAT's) administrative guidelines on the calculation of banks' partial deduction rate.

The High Court had reached the same conclusion.