VAT liability arises regardless of citizenship, residence, principal
place of management, or the place of billing or payment.
The only criterion for liability for German VAT purposes is that the
business executes taxable transactions within Germany in
excess of certain limits. Microbusinesses that fulfll certain cri-
teria are not liable for VAT in Germany pursuant to the so-called
Kleinunternehmerregelung, but these provisions are generally
only applicable to businesses established in Germany.
Basically, persons who acquire, retain, and sell interests in
companies are not liable for VAT. When a holding company is ac-
tively engaged in the day-to-day business of the subsidiary, the
acquisition, retention, and realization can be treated as business
activity with VAT liability. The same applies if an investment was
acquired to perform management services for subsidiary com-
panies (e. G. Administrative, fnancial, or technical services). If an
interest is held not for the interest’s sake (the mere intention to
receive dividends), but in order to further an existing or intended
business activity, holding such interest is deemed a business
This includes securing access to improved purchasing
terms, obtaining infuence on potential competitors, or securing
access to improved sales conditions.