Holding company management services to subsidiaries are not a single supply for VAT purposes: implications of the Högkullen judgment for Spanish groups

Judgment of the Court of Justice of the European Union (CJEU) of July 3, 2025 (Case C-808/23, Högkullen AB)

The relationship between holding companies and Value Added Tax (VAT, IVA) is an area of perpetual controversy. From the holding company’s very status as a business operator (empresario o profesional)—depending on whether or not it actively intervenes in the management of its investee companies—to the scope of its right to deduct input VAT, disputes between tax authorities and taxpayers follow one another in an unbroken succession. The CJEU judgment of July 3, 2025, in Case C-808/23PDF (Högkullen AB) adds a significant piece to this complex puzzle, this time concerning the determination of the tax base of the management fees that the holding company invoices to its subsidiaries.

The facts: a Swedish real estate holding company

Högkullen AB is the parent company of a Swedish group engaged in real estate management. Its economic activity consists exclusively of providing its nineteen subsidiaries with a range of business management, financial, real estate management, investment, IT, and personnel management services. The subsidiaries, for their part, carry out transactions that are partly VAT-exempt (leasing of residential property), which limits their right to deduct the input VAT on the invoices received from the parent company.

In 2016, Högkullen invoiced its subsidiaries a total of approximately €204,000, calculated by reference to its costs plus a markup (the cost plus method). To do so, it allocated to the services provided a percentage of its management, premises, telephone, IT tool, representation, and travel costs, excluding the so-called “shareholder costs” (annual accounts, audit, general meeting, fundraising), on the grounds that these bore no relation to the services provided to the subsidiaries. The holding company deducted all the input VAT on all its expenses, including the “shareholder costs.”

The problem was the disproportion: the holding company’s total costs amounted to approximately €2,484,000, whereas the consideration invoiced was a mere €204,000. The Swedish tax authorities considered that the services had been invoiced below their open market value and, since—in their view—there were no comparable services on the open market, set the tax base at an amount equal to the full costs incurred by the holding company.

The question referred for a preliminary ruling: a single supply or separate services?

The dispute between the parties centered on Articles 72PDF and 80 of Directive 2006/112/EC. Article 80 allows Member States to set the tax base at open market value where the transaction takes place between related persons and the recipient does not have a full right of deduction. Article 72, for its part, defines open market value according to a tiered system: first, by comparison with equivalent services supplied between independent parties (first paragraph); and, only where no such comparable exists, by reference to the full cost to the taxable person of providing the service (second paragraph).

The Swedish tax authorities argued that the parent company’s active management of its subsidiaries constituted, as a matter of principle, a single complex service for which no equivalent existed on the open market, so that the second paragraph of Article 72 (full costs) had to be applied directly. The holding company, by contrast, argued that the various services (business management, financial, IT, etc.) had to be assessed individually, since comparables could be found on the market for each of them.

The CJEU’s ruling: no presumption of a single supply

The CJEU decided the question in the taxpayer’s favor, concluding that Articles 72 and 80 of the VAT Directive preclude the tax authorities from considering that the services supplied by a parent company to its subsidiaries in the context of their active management constitute, in all cases, a single supply that rules out determining open market value using the comparison method under the first paragraph of Article 72.

The Court’s reasoning rests on its settled case law on defining the taxable event where a transaction comprises a bundle of supplies. Each of the services provided—business management, financial, real estate management, investment, IT, personnel management—has its own distinct and identifiable character, which prevents them from being objectively regarded as a single, indivisible economic supply. The fact that the subsidiaries paid an overall price for all the services is not decisive since—as the Court points out—otherwise the group itself could influence the classification of the supplies for VAT purposes through the remuneration arrangements agreed.

Practical consequences: the cost plus method under scrutiny

The judgment has direct implications for Spanish groups with holding companies that invoice management fees to their subsidiaries.

The first and most immediate is that the tax authorities may not, automatically and without an individualized analysis, reject the comparability of the services provided by the holding company and resort directly to the full cost method to set the VAT tax base. Before turning to the second paragraph of Article 72 of the Directive, valuation by reference to comparable services under the first paragraph must be attempted.

The second consequence is subtler but equally relevant. In Högkullen, the holding company had set the consideration using the cost plus method, which is common in transfer pricing for Corporate Income Tax (IS) purposes. However, as the CJEU has pointed out on various occasions—including in the FCE Bank judgment (C-210/04)PDF—the principles of direct taxation cannot automatically be transposed to VAT. The definition of open market value in Article 72 of the Directive bears greater similarity to the comparable uncontrolled price method (CUP, in OECD terminology) than to the cost plus method. This means that, for VAT purposes, the correct valuation should start from a search for comparable services offered on the market, and only in their absence turn to total cost.

Article 79.Five of the Spanish VAT Law

In the Spanish legal system, Article 79.Five of Law 37/1992PDF lays down a rule analogous to Article 80 of the Directive, allowing the tax base to be set at open market value in transactions between related parties where the recipient is not entitled to deduct VAT in full. The definition of open market value, in turn, refers to Article 18 of Law 27/2014, on Corporate Income TaxPDF, which has created some confusion in practice by overlapping transfer pricing criteria with VAT criteria.

In light of the Högkullen judgment, this cross-reference must be interpreted with caution. The transfer pricing methodology of Article 18 of the Corporate Income Tax Law (LIS) may serve as a starting point, but determining market value for VAT purposes requires, before resorting to alternative methods, verifying whether comparable services exist on the market, assessing each supply individually.

A timely reminder: Article 80 requires a limitation on the right of deduction

The Högkullen judgment also provides an opportunity to recall an aspect that is frequently overlooked: the mechanism of Article 80 of the Directive (and its Spanish equivalent) can only be triggered where one of the parties does not have a full right of deduction. As established in CJEU case law—in particular, the judgment of April 26, 2012, Joined Cases C-621/10 and C-129/11 (Balkan and Sea Properties)PDF—if both the supplier and the recipient of the service have a full right to deduct VAT, there is no risk of fraud or evasion, and the tax authorities may not resort to market valuation, regardless of whether the parties are related and the agreed price is below market value.

This principle is particularly relevant for Spanish business groups in which all the companies carry out exclusively transactions that are subject to and not exempt from VAT. In such cases, the management fees invoiced by the holding company to its subsidiaries—whatever their amount—cannot be the subject of a VAT adjustment to market value, since the enabling condition of Article 80 is not met: the limitation on the right of deduction.

Link with subsequent case law: the Arcomet Towercranes case

The Högkullen judgment is not an isolated ruling; rather, it forms part of a line of CJEU case law that addresses in increasing detail the interaction between VAT and transfer pricing in intragroup transactions. Barely two months later, the CJEU handed down its judgment of September 4, 2025, in Case C-726/23 (Arcomet Towercranes)PDF, in which it analyzed whether annual transfer pricing adjustments contractually agreed between group companies are subject to VAT. In turn, Case C-603/24 (Stellantis Portugal)PDF, which is still pending, will explore this same issue in greater depth. The landscape is therefore far from settled, and groups with significant intragroup transactions should closely monitor the development of this case law.

Practical recommendations

In light of this judgment, Spanish groups with holding companies that provide management services to their subsidiaries should review both the documentation of their intragroup transactions and the valuation methodology used for VAT purposes. If the subsidiaries carry out exempt transactions that limit their right of deduction—which is common in the real estate, financial, and healthcare sectors—the tax authorities could challenge the tax base of the management fees by applying the market value rule. To mount an effective defense, it will be essential to demonstrate that each service has been valued, in the first place, by reference to market comparables, and that the methodology followed has not been limited to an overall allocation of costs.

For groups in which all the companies have a full right of deduction, the judgment reinforces the position that the tax authorities have no basis for adjusting the VAT on intragroup services to market value, regardless of the agreed price.

Conclusion

The Högkullen judgment brings clarity to an area—the invoicing of management services by holding companies—that squarely affects the day-to-day practice of business groups. The main conclusion is twofold: on the one hand, the tax authorities may not presume that the holding company’s management services are a single supply that precludes the search for market comparables; on the other, valuation for VAT purposes is not automatically governed by transfer pricing rules and requires an individualized analysis of each service provided. For Spanish holding companies, the judgment is a reminder that consistency between valuation for IS and VAT purposes cannot be taken for granted, and that documentation must meet the specific requirements of each tax.

At OC | Tax & Legal we advise business groups on structuring and documenting their intragroup transactions, with an integrated approach that simultaneously addresses the requirements of Corporate Income Tax and VAT, minimizing the risk of adjustments and ensuring the tax consistency of the structure as a whole.