Looking back @2021 #18: VAT Grouping, a tool to avoid VAT leakage, optimize VAT receivables and simplify processes

Article in the EU VAT Directive 2006/112/EC

Article 11 of the EU VAT Directive gives the EU Member States the option to implement a VAT group.

Article 11
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.

• Which Member States in the European Union allow for VAT grouping? (Before implementation in Poland and France)
• Purpose and characteristics of the VAT group regime as provided for by the recast directive (directive 2006/112 / EC)

Developments as of 2022

• Jan 1, 2022: Poland – Optional implementation of VAT grouping
• Jan 1, 2023: France – Optional implentation of VAT grouping

ECJ Cases

• Roadtrip through ECJ Cases – Focus on ”VAT Grouping” (Art. 11)
• Roadtrip through ECJ Cases – Supplies of services between Head Office and its Branch, whereby one of the parties is part of a VAT Group
• ECJ Cases decided in 2021
  • ECJ C-868/19 (M-GmbH) – Members of a partnership and the head entity can form a VAT group
  • ECJ C-812/19 (Danske Bank) – Head Office part of VAT group & its Branch are separate taxable persons

Outside the EU 

• VAT Grouping has been implemented in these countries ….
• Indonesia – Guidance: Group Registration

Interesting newsitems published in 2021

• VAT treatment of post-Brexit transactions between an Italian branch and a parent company belonging to a UK VAT Group

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Check also the previous articles on ”Looking back @2021”

1. Brexit
2. E-Commerce VAT Directive launched in the EU per July 1, 2021
3. Next to the EU, 14 countries implemented VAT on E-Commerce, another 7 will implement in 2022
4. Saudi-Arabia is the first country in the Middle East launching E-Invoicing, UAE may follow
5. The concept of Fixed Establishments remains a major risk, and even why?
6. Intrastat: Major updates applicable as of Jan 1, 2022
7. Implementation/changes E-Invoicing & Real Time Reporting during 2021
8. ECJ cases decided in 2021 on ”Taxable Amount”

9. Increased focus on Fighting Climate Change – Carbon tax

10. 49 ECJ VAT Cases decided (incl. orders) in 2021
11. Split Payments
12. Poland and France to introduce optional taxation of Financial Services – Exemption may not longer be applied
13. Activities of the VAT Expert Group
14. ECJ cases decided in 2021 on ”Exemptions”
15. Pre-Filled VAT returns
16. SAF-T (or equivalent) regulations, some more countries will implement
17. Environmental Tax – Will Plastic Tax stop pollution?