Tax Authorities Update Guidelines on VAT Treatment of Operations between Head Office and Branches

According to the principles of value added tax (VAT), transactions carried out between different entities of the same legal person are normally not taxable.

However, by a judgment of September 17, 2014 ( CJEU, decision of September 17, 2014, case C-7/13, “Skandia America Corp.” ), the Court of Justice of the European Union (CJEU) ruled that transactions subject to VAT the provision of services provided by a main establishment to its branch when the following conditions are met:

– the branch is established in a Member State of the European Union and the main establishment is located in another State (third State or other Member State of the European Union);

– the branch is a member of a “VAT group”. The “VAT group” or grouping of persons corresponds to the option for various legally independent entities to constitute, under certain conditions, a single taxable person in order to exclude from the scope of VAT transactions carried out between them. Each Member State may or may not open this option for entities established in its territory.

By a second judgment ( CJEU, decision of 11 March 2021, case C-812/19, “Danske Bank A / S”) , the CJEU clarified that this solution was to be applied symmetrically when the main establishment, and either the branch, is a member of a VAT group in its Member State of establishment.

It follows from the principles thus established that, under these same conditions, the supplies of services provided to the main establishment by the branch, and the supplies of services provided between branches or, more generally, between the entities of the branch, are also liable to VAT. ” a single legal entity with its own permanent establishments.

The Council of State applied these principles in a decision of 4 November 2020, Société BNP Paribas Securities Services ( CE, decision of 4 November 2020, n ° 435295, Société BNP Paribas Securities Services ).

Consequently, the rules applicable to transactions carried out within the same legal person for the benefit of an entity belonging to a VAT group in another Member State of the European Union are specified.

Source: Bofip

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