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Changes to VAT groups

17 Sep 2014

Following the Skandia America Corporation case ruling, services supplied from a main establishment to its branch belonging to a VAT group are taxable for VAT purposes. Taxand Finland takes a look at the recent legislation.

In 2006, the Court of Justice of the European Union (CJEU) ruled that a fixed establishment, together with its non-resident company, must be considered as one and the same taxable person. Consequently, the fixed establishment was not to be treated as a taxable person by reason of the costs imputed to it in respect of those supplies. The main question in the Skandia case was whether the judgment of the CJEU is applicable in the relation between the head office in the USA and its Swedish fixed establishment which is part of the VAT group, and if so, if the VAT on the services concerned is due by the service provider or the recipient of the service.

In its judgment given on 17 September 2014, the CJEU concluded that for VAT purposes the services supplied for consideration by a company to a branch belonging to a VAT group must be regarded as being supplied to the VAT group and not to the branch. As the company and the VAT group cannot be considered to be a single taxable person, the supply of such services constitutes a taxable transaction.

Discover more: Services supplied from a main establishment to its branch belonging to a VAT group are taxable for VAT purposes

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Janne Juusela
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Taxand's Take

As a result of the judgement, Multinationals with such a VAT group should consider any alternative solutions and potential actions to be taken.

Taxand's Take Author

Janne Juusela

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