Response No. 216/2025 – VAT Treatment of Transactions Between Permanent Establishments of the Same Foreign Entity Belonging to a VAT Group in Another EU MS

Here’s a summary of the Italian Revenue Agency’s Risposta n. 216/2025:

Topic

The document addresses VAT treatment of services exchanged between two permanent establishments (PEs) of the same foreign company—one in Italy (ALFA1) and one in the UK (ALFA2)—with the parent company being part of a VAT Group in an EU country.

❓ Key Question

Does the VAT rule in Article 70-quinquies, paragraph 4-quinquies of DPR 633/1972, which incorporates the principles of the Skandia ruling, apply to services provided by ALFA2 to ALFA1?

⚖️ Interpretation by the Taxpayer

The taxpayer argues that:

• ALFA1 and ALFA2 are part of the same legal entity.
• Services exchanged between them should be excluded from VAT, based on the FCE Bank ruling, which treats intra-entity transactions as non-taxable.

️ Revenue Agency’s Response

The Agency disagrees and clarifies:

• Since the parent company is part of a VAT Group in an EU country, the unity of the legal entity is broken for VAT purposes.
• Therefore, services provided by ALFA2 to ALFA1 are subject to VAT in Italy, as they are considered transactions between distinct taxable persons.

Legal Basis

• The Skandia and Danske Bank rulings by the EU Court of Justice are cited to support the view that VAT Group membership alters the VAT treatment of intra-group services.
• The UK’s VAT Group is not recognized as equivalent to an EU VAT Group post-Brexit, reinforcing the territorial limitation of VAT Group effects.

Source Agenzia Entrate

See also ECJ Cases

• C-210/04 FCE Bank
• C-7/13 Skandia
• C-812/19 Danske Bank

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Head Office’s Group VAT Membership Separates Subjective Unity Among Branches in EU States

• The main office joining a group regime breaks the subjective unity among branches.
• Joining an EU VAT Group by the parent company ends the subjective identity with its permanent establishments.
• Branches are considered separate taxable entities from the parent company and the VAT Group.
• Transactions between branches may be relevant for tax purposes.
• This clarification was provided by the Revenue Agency in response to inquiry number 216.
• The case involves a foreign company ALFA and its branches ALFA1 in Italy and ALFA2 in the UK.
• The Italian branch receives IT and back-office services from the UK branch.

Source: eutekne.info

Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.

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