On 11 March 2021, the European Court of Justice (‘CJEU’) ruled in the Danske Bank case (C-812/19 that a head office is a separate taxable person in relation to a foreign branch for VAT purposes if the head office is part of a VAT group.
Based on the Danske Bank judgment, services between a head office that is part of a VAT group and a foreign branch take place within the scope of VAT. In the case in question, the Swedish branch must consequently pay reverse-charged VAT for the services it received from its Danish head office.
The case is the mirror image of the case in the Skandia judgment, where the foreign branch formed part of a local VAT group with other entities. Although, in that case the CJEU also ruled that the transactions were within the scope of VAT, the judgment is nevertheless surprising. In current Dutch practice it is assumed that if a head office is part of a VAT group this does not have any consequences for the transactions with the foreign branch.
Source: PwC
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