- Separate supplies, not a composite one: The Court ruled that a bundle of intangible services (management, finance, real estate, IT, HR) supplied by a parent company to its subsidiaries should generally be treated as distinct and separate supplies, not a single composite supply.
- Single price ≠ single supply: Even if these services are invoiced under a single price, this does not make them a single supply—especially in intra-group contexts, where pricing may be contractually manipulated and not reflect economic reality.
- Implications for VAT base: As the services are separable and identifiable, the market value (Article 80 VAT Directive) must be assessed service-by-service, and the cost-based uplift approach proposed by the tax authority (SEK 28m vs. invoiced SEK 2.3m) was undermined by the finding of multiple supplies.
Source Pawel Mikula
Different management services of the holding company do not in all cases constitute a single supply
- CJEU Ruling on Service Supply Classification: The Court of Justice of the European Union (CJEU) ruled that the Swedish Tax Administration’s practice of categorizing all services provided by Högkullen AB to its subsidiaries as a single supply in the context of active management is inconsistent with EU law.
- Tax Implications of Services: Högkullen AB provides various management services to its subsidiaries, which manage real estate activities that are partially tax-exempt. The services offered by Högkullen AB are fully subject to VAT, and the Swedish tax authorities based their VAT calculations on the total expenditure of SEK 28 million, treating it as a single taxable supply.
- Determining Market Value: The CJEU clarified that the open market value of the services cannot be assessed using the method of comparison specified in Article 72 of the VAT Directive, indicating that each service should be evaluated individually rather than as a combined supply.
Source Taxlive
- Judgment Overview: The CJEU ruled in Case C-808/23 that intra-group services provided by a parent company to subsidiaries do not automatically constitute a single supply for VAT purposes and must be evaluated separately.
- Normal Value Determination: The court clarified that the normal value of services, which should reflect what an independent party would pay, cannot be assumed to be a single entity if comparable services exist in the market. Each service must be priced based on its specific costs and market conditions.
- Implications for Tax Authorities: The ruling emphasizes that tax authorities cannot universally categorize intra-group services as a single supply, thus requiring a detailed examination of each service to determine the appropriate VAT treatment based on Articles 72 and 80 of the VAT Directive.
Source: taxheaven.gr
European Court further clarifies interplay between VAT and transfer pricing
- CJEU Ruling Clarification: The European Court of Justice (CJEU) provided clarity on how intra-group transfer pricing arrangements should be treated for VAT, stating that the open market value for services provided by a holding company to its subsidiary must reflect arm’s length principles and should be assessed individually rather than as a single supply.
- Impact of Open Market Value: Member States can opt to apply the open market value for intra-group supplies, particularly when related parties perform supplies below this value. The CJEU ruling indicates that each distinct service provided should have its own comparable market price, rather than relying on the total cost incurred by the parent company.
- Documentation Importance: Businesses are urged to maintain comprehensive documentation that demonstrates the arm’s length nature of their intra-group transactions and the corresponding VAT treatment, especially in jurisdictions where open market value rules are applied, to ensure compliance and mitigate potential VAT leakage.
Source Loyens Loeff
See also
- ECJ C-808/23 (Högkullen) – Judgment – Parent-subsidiary services cannot always be treated as a single supply – VATupdate
- Briefing Document & Podcast: Högkullen AB Case (C-808/23) – VAT, Normal Value, and Intra-Group Services – VATupdate
- Join the Linkedin Group on ECJ/CJEU/General Court VAT Cases, click HERE
- VATupdate.com – Your FREE source of information on ECJ VAT Cases