On September 14, 2017, the ECJ issued his judgment on C-7/13 Skandia on whether there is a supply of services between head office and branch part of VAT group constitutes a taxable transaction.
Article in the EU VAT Directive
2(1), 9, 11, 56, 193 and 196 of Council Directive 2006/112/EC
Article 2 (Taxable Transaction)
1. The following transactions shall be subject to VAT:
(a) the supply of goods for consideration within the territory of a Member State by a taxable person acting as such;
(b) the intra-Community acquisition of goods for consideration within the territory of a Member State by:
(i) a taxable person acting as such, or a non-taxable legal person, where the vendor is a taxable person acting as such who is not eligible for the exemption
for small enterprises provided for in Articles 282 to 292 and who is not covered by Articles 33 or 36;
(ii) in the case of new means of transport, a taxable person, or a non-taxable legal person, whose other acquisitions are not subject to VAT pursuant to Article 3(1), or any other non-taxable person;
(iii) in the case of products subject to excise duty, where the excise duty on the intra-Community acquisition is chargeable, pursuant to Directive 92/12/EEC, within the territory of the Member State, a taxable person, or a non-taxable legalperson, whose other acquisitions are not subject to VAT pursuant to Article 3(1);
(c) the supply of services for consideration within the territory of a Member State by a taxable person acting as such;
(d) the importation of goods.
Article 9 (Taxable person)
1. “Taxable person” shall mean any person who, independently, carries out in any place any economic activity, whatever the purpose or results of that activity.
Any activity of producers, traders or persons supplying services, including mining and agricultural activities and activities of the professions, shall be regarded as “economic activity”. The exploitation of tangible or intangible property for the purposes of obtaining income therefrom on a continuing basis shall in particular be regarded as an economic activity.
2. In addition to the persons referred to in paragraph 1, any person who, on an occasional basis, supplies a new means of transport, which is dispatched or transported to the customer by the vendor or the customer, or on behalf of the vendor or the customer, to a destination outside the territory of a Member State but within the territory of the Community, shall be regarded as a taxable person.
Article 11 (Taxable person – VAT grouping)
After consulting the advisory committee on value added tax (hereafter, the “VAT Committee”), each Member State may regard as a single taxable person any persons established in the territory of that Member State who, while legally independent, are closely bound to one another by financial, economic and organisational links.
A Member State exercising the option provided for in the first paragraph, may adopt any measures needed to prevent tax evasion or avoidance through the use of this provision.
Article 56 (Place of supply of services)
1. The place of short-term hiring of a means of transport shall be the place where the means of transport is actually put at the disposal of the customer.
2. The place of hiring, other than short-term hiring, of a means of transport to a non-taxable person shall be the place where the customer is established, has his permanent address or usually resides.
However, the place of hiring a pleasure boat to a non-taxable person, other than shortterm hiring, shall be the place where the pleasure boat is actually put at the disposal of the customer, where this service is actually provided by the supplier from his place of business or a fixed establishment situated in that place.
3. For the purposes of paragraphs 1 and 2, “short-term” shall mean the continuous possession or use of the means of transport throughout a period of not more than thirty days and, in the case of vessels, not more than 90 days.
Article 193 (Liability to pay VAT)
VAT shall be payable by any taxable person carrying out a taxable supply of goods or services, except where it is payable by another person in the cases referred to in Articles 194 to 199b and Article 202.
Article 196 (Liability to pay VAT)
VAT shall be payable by any taxable person, or non-taxable legal person identified for VAT purposes, to whom the services referred to in Article 44 are supplied, if the services are supplied by a taxable person not established within the territory of the Member State.
Facts
- The request has been made in proceedings between Skandia America Corp. (USA), filial Sverige (‘Skandia Sverige’), and the Skatteverket (the Swedish tax authorities) regarding the latter’s decision to charge value added tax (‘VAT’) on the supply of services by Skandia America Corp. (‘SAC’), established in the United States, to its branch Skandia Sverige.
- In 2007 and 2008, SAC was the global purchasing company for IT services for the Skandia group and carried out its activities in Sweden through its branch, Skandia Sverige.
- SAC distributed externally-purchased IT services to various companies in the Skandia group and to Skandia Sverige which, since 11 July 2007, has been registered as a member of a VAT group.
- Skandia Sverige was tasked with processing the externally-purchased IT services to produce the final product, ‘IT-production’ (IT-produktion). That final product was then supplied to various companies in the Skandia group, both within and outside the VAT group. A mark-up of 5% was charged on each supply of services, both between SAC and Skandia Sverige and between the latter and other companies in the Skandia group. Costs were allocated between SAC and Skandia Sverige by the issue of internal invoices.
- The Skatteverket decided to charge VAT on the supplies of IT services from SAC to Skandia Sverige in the 2007 and 2008 financial years. That tax authority, taking the view that those supplies constituted taxable transactions, considered SAC to be liable for VAT.
- Consequently, Skandia Sverige was identified as also liable for VAT and it was charged the amount of tax relating to those supplies on the ground that it was SAC’s branch in Sweden.
- Skandia Sverige brought an action against those decisions before the referring court.
Question
AG Opinion
I therefore propose that the Court should give the following answer to the questions referred by the förvaltningsrätten i Stockholm:
– Primarily:
(1) Article 11 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax must be interpreted as meaning that the branch of a company constituted in compliance with the law of a third country cannot, independently of that company, be registered in a group formed by several companies regarded as a single taxable person for value added tax and constituted in the Member State in which it is established. The supplies of services taking place between the main establishment and the branch do not constitute taxable transactions for the purposes of value added tax, unlike the supplies of services taking place between the branch and its customers, whether or not these are members of the group.
– In the alternative:
(2) Article 196 of Directive 2006/112 must be interpreted as meaning that, where the main establishment of a company is located in a third country and is a supplier and taxable person not established in the Member State where it has a branch, it is the purchaser of services, that is, the group formed by several companies regarded as a single taxable person for value added tax to which the branch belongs, that must be taxed on the services in question, in accordance with Article 56 of that directive.
Decision
1. Articles 2(1), 9 and 11 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax must be interpreted as meaning that supplies of services from a main establishment in a third country to its branch in a Member State constitute taxable transactions when the branch belongs to a group of persons whom it is possible to regard as a single taxable person for value added tax purposes.
2. Articles 56, 193 and 196 of Directive 2006/112/EC must be interpreted as meaning that, in a situation such as that in the main proceedings where the main establishment of a company in a third country supplies services for consideration to a branch of that company in a Member State and where the branch belongs to a group of persons whom it is possible to regard as a single taxable person for value added tax purposes in that Member State, that group, as the purchaser of those services, becomes liable for the value added tax payable.
Source
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Implementation/interpretation in the Member States
