The French Administrative Court of Appeal of Paris has clarified the conditions under which input VAT may be deducted on transactions carried out before a company is formally incorporated.

The case concerned a company engaged in the acquisition and management of racehorses that sought to deduct input VAT on the purchase of a racehorse, arguing that the acquisition had been made on its behalf before its incorporation.

The Court rejected the claim and confirmed that the VAT deduction was not available. It found that:

1. The original purchase invoice and payment records identified a different company as the purchaser.
2. A later invoice naming the taxpayer as the purchaser did not invalidate or replace the original invoice, as it contained no indication that it superseded the earlier document.
3. The taxpayer failed to demonstrate that the racehorse had been acquired on its behalf while the company was being formed.
4. As the acquisition could not be linked to the taxpayer, the input VAT deduction was correctly denied.

The judgment highlights the importance of maintaining consistent documentation when claiming input VAT on transactions completed before a company’s incorporation. Although VAT deductions may be available for pre-incorporation expenses in certain circumstances, taxpayers must clearly demonstrate that the transaction was carried out on behalf of the future company and provide supporting evidence.

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Source: gouv.fr