VAT groups and cross border supplies

The Court of Justice of the European Union (the ‘CJEU’) handed down its decision in Danske Bank A/S v Skatteverket (C-812/19) on 11 March 2021. The decision could have ramifications for businesses who are members of an Irish VAT group, who have overseas establishments.

Danske Bank A/S (‘Danske’) is a Danish bank headquartered in Copenhagen, operating in Sweden through a branch. The Swedish Court sought a ruling from the Court of Justice of the European Union (the ’CJEU’) on the question of whether the presence of Danske’s head office in a Danish VAT group means that it and its Swedish branch are to be viewed as constituting two separate taxable persons for VAT purposes.

The CJEU found that that the Danish VAT grouped head office is a separate taxable person to its Swedish branch. The relatively short judgment focused on the territorial and operational scope of the EU VAT grouping rules with the Court putting forward its view that EU VAT grouping laws “..contain a territorial limitation…that a Member State may not provide for a VAT group to include persons established in another Member State”.

Therefore, EU VAT laws permitting Member States to implement VAT grouping should be interpreted in such a way that only local establishment VAT grouping is permitted. As such the Danish head office and the Swedish branch could not be considered to be a cross-border single taxable person. Therefore, transactions between them could not be disregarded and fell to be taxed in the normal manner.

Source Deloitte