On March 11, 2021, the ECJissued its decision in the case C-812/19 (Danske Bank) related to the classification of supplies of services between a head office and its branch whereby the head office is part of a VAT group in the country where it is established (Denmark).
Article in the EU VAT Directive
2(1), 9(1) and 11 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(1) (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.
- Danske Bank has its headquarters in Denmark and operates its activities in Sweden through a branch.
- Danske Bank is part of a Danish VAT group.
- The branch is not part of the Swedish VAT group.
- The bank use of an IT platform for its activities in the Nordic countries.
- HQ charges a fee to the branch for the Swedish use of that platform.
- The branch raised a request to the fiscal committee to ascertain whether the fact that the bank is a member of a Danish VAT group, implies that the VAT group should be considered as a distinct taxpayer, from the Swedish branch’s perspective (i.e. a reverse Skandia situation).
- The branch also wanted to know if the services provided by the Danish VAT group, the costs of which imputed to the branch, were subject to VAT, if the VAT should be reverse charge to the Swedish branch, and if the taxable base equals the allocated costs.
- Danske appealed against the decision of the fiscal committee.
Is a Swedish branch of a bank whose HQ is in another Member State to be treated as a distinct taxpayer, if the HQ is part of a VAT group of which the Swedish branch is not a part, and the HQ performs services for the branch and allocates the costs thereof to the branch?
Article 9 (1) and 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, for the purposes of value added tax (VAT), the main establishment of a company, located in a Member State and forming part of a VAT group established on the basis of this article 11, and the branch of this company, established in another Member State, must be considered as separate taxable persons when that main establishment provides the said branch with services for which it charges it.
Related court cases
- Roadtrip through ECJ Cases – Supplies of services between Head Office and its Branch, whereby one of the parties is part of a VAT Group
References to the case in the EU Member States
- Poland: Polish Supreme Court confirms findings of CJEU Danske Bank case are applicable to VAT settlements of Polish branches
- BTW jurisprudentie in Dutch
- Deloitte insights
- Aleksandra Bal
- Baker Tilly
- Loyens Loeff – ECJ Danske Bank – consequences for NL, BE and LUX
- PwC NL (in Dutch)
- Deloitte Luxembourg
- Deloitte Taxathand
- Grant Thornton
- Baker & McKenzie
- Baker & McKenzie 2