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ECJ Rules in VAT Grouping Case

17 Apr 2013
Ireland has won a case taken by the EU Commission against it for allowing holding companies and other non-taxable persons to be included in VAT Groups.

The Commission had also initiated proceedings against Finland, the Netherlands, Spain, the United Kingdom, Denmark and the Czech Republic on the same grounds. Taxand Ireland discusses the irish case and its impact on VAT Groups.

VAT Grouping allows for several entities to be treated as one single entity for VAT purposes. The Commission had argued that each person to be included in a VAT Group should carry on a taxable activity. If successful in its argument this would have had a significant impact on VAT Groups which currently include holdings companies. Such VAT Groups can currently provide goods and services within the group without accounting for VAT on such supplies (except for supplies of property).

Ireland successfully argued that the literal wording of the VAT Directive allows any persons to be included in a VAT Group. This would include non-taxable persons such as holding companies and dormant companies.

The ECJ agreed with Ireland's arguments that by allowing non-taxable persons to join VAT Groups, the objectives of the legislation of simplifying administration and combating abuse are met. The ECJ endorsed the opinion of the Advocate General who stated that an individual taxable person can carry on activities which fall within the scope of VAT as well as activities which fall outside the scope of VAT and a VAT Group should be no different.

Your Taxand contacts for further queries are:
Martin Phelan
T. +353 1 639 5139

Orla Maher
T. +353 1 639 5399

Taxand's Take

This is good news for existing Irish VAT Groups who now have certainty regarding their position as well as for future VAT planning. The certainty provided by this decision will also be welcomed by other countries such as the UK who, to date, have applied the same treatment in respect of VAT groups as Ireland.

Taxand's Take Author

Martin Phelan
Taxand Board member