7.8.3 Case 3

A company needs fresh capital and decides to issue bonds.

The costs attributable to the issue of bonds qualify as ‘general costs’ which have, as such, a link with the business as a whole, meaning that the VAT on these costs is deductible according to the pro rata applicable to (this part of) the business.

In the UK, the Kretztechnik decision is applied.1 The issue of bonds is not a supply for VAT purposes. The costs attributable to the issue of bonds qualify as overheads which are directly and immediately linked to the whole economic activity. The input VAT on these costs is deductible on basis of the pro rata applicable to the business.

Still to be decided. However, it is assumed that the principles of Kretztechnik apply as well.2

It is likely that the answer in 8.1 applies, considering the economic purpose of the issue of bonds, although the position provided for by the tax authorities only relates to transactions in shares.