VAT group; cross-border; Article 11 VAT Directive; exhaustive harmonization; Article 7 Wet OB 1968; Article 49 TFEU; freedom of establishment; Article 267 TFEU; primary and secondary EU law.
The entity in question forms part of a VAT group for value-added tax (VAT) purposes. Certain components of this entity receive shared costs from affiliated companies based in Germany. The entity argues that the imposition of VAT in the Netherlands on these shared costs goes against the freedom of establishment as outlined in Article 49 of the Treaty on the Functioning of the European Union (TFEU). According to the entity, if the German companies were situated in the Netherlands, they could have been included in its Dutch VAT group, and the shared costs wouldn’t be subject to VAT in the Netherlands. The entity asserts that under such circumstances, even in a cross-border situation, Dutch VAT shouldn’t apply to these shared costs.
The lower court (Rechtbank) rules that there’s no restriction on the freedom of establishment. If there were a restriction, it would affect the freedom of establishment of the German affiliated companies, not the entity. The higher court (Hof) concludes that the entity’s argument contradicts the jurisprudence of the Court of Justice. Furthermore, the nature and intent of the VAT Directive and the state of EU harmonization go against the entity’s argument. The consequences the entity is advocating for would complicate administrative matters and lead to distortions in competition, the Hof states.
The entity files an appeal in cassation with a single argument. The argument contends that the Hof evaluated the freedom of establishment incorrectly. Additionally, the Hof didn’t address the entity’s argument about the ‘per-element approach’. The entity is not seeking to form a cross-border VAT group with the German affiliated companies; it merely wants to gain a specific advantage from the Dutch VAT group regime in a cross-border context.
Advocate-General (A-G) Ettema notes that the territorial scope of the Dutch VAT group, as per Article 7(4) of the Wet OB, is aligned with Article 11 of the VAT Directive. Consequently, the A-G evaluates the directive’s provision in relation to the freedom of establishment. The A-G concludes that the territorial limitation of the VAT group essentially restricts the freedom of establishment. The A-G then examines six justifications that could potentially validate this limitation. Among these, the A-G asserts that two justifications can validate the restriction on the freedom of establishment: the coherence of the tax system or fiscal sovereignty. The entity’s argument for the per-element approach isn’t effective, as the benefit it seeks is directly linked to the VAT group arrangement. Therefore, the A-G concludes that the entity’s argument cannot result in the annulment of the contested decision.
Source: uitspraken.rechtspraak.nl
