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Advocate General’s Opinion Provides Boost for VAT Groups

29 Nov 2012

On 27 November Advocate General J??skinen released his opinion in Case C-85/11 EC v Ireland. He has concluded that the practice of permitting non-taxable persons to be members of a VAT Group does not infringe the VAT Directive. Taxand Ireland discusses the debate surrounding the taxation of EU VAT groups.

Ireland currently allows non-taxable entities such as holding companies to join Irish VAT groups. The EU Commission believes that all members of VAT groups should be taxable persons. The Commission requested that Ireland (along with certain other Member States, including the UK) amend its legislation in relation to VAT grouping and has referred the issue to the ECJ.

The case was heard in September, and a full ruling is not expected until next year. However Advocate General J??skinen has issued an opinion on the case stating that non taxable persons can be members of a VAT group.

The Irish case was heard at the same time as Case C-86/11 EC v UK and other similar proceedings brought by the Commission against the Czech Republic, Denmark, Finland, Sweden and the Netherlands. The European Court asked for only one opinion to be produced ahead of its judgment on the basis that the same point of principle arises in each case. This opinion therefore equally to the UK where it is HMRC's practice to allow non-taxable persons to belong to VAT groups.

The opinion states that it is not an anomaly that non-taxable persons can belong to a VAT group. This is because "any taxable person may be engaged in activities falling within the scope of VAT and activities falling outside of the scope of VAT". In this respect, the opinion states that no distinction can be made between an ordinary taxable person and a VAT group and that "from the perspective of fiscal neutrality the inclusion of non-taxable persons in a VAT group makes no difference to the pursuit of the goals of the VAT grouping regime".

Taxand's Take

The opinion of the Advocate General is a positive outcome for Ireland and the other Member States awaiting final rulings. While an Advocate General's opinion is not binding, the ECJ have tended to follow these opinions in the main and it is hoped that the opinion of Advocate General J??skinen will be followed by the ECJ in this case.

Your Taxand contact for further queries:
Sonya Manzor
T: +353 1 639 5212

Taxand's Take Author