European Court – T-268/25 (Sampension Livsforsikring) – Judgment – VAT group 100% ownership condition precluded, but no direct effect

On July 15. 2026, the General Court issued its judgment in the case T-268/25 (Sampension Livsforsikring).

Context: Reference for a preliminary ruling – Taxation – Value added tax (VAT) – Article 11 of Directive 2006/112/EC – Taxable persons – ‘VAT group’ – Persons closely bound to one another by financial, economic and organisational links – Measures to prevent tax evasion or avoidance – National legislation requiring 100% ownership for certain taxable persons

Summary

Facts: Sampension Livsforsikring A/S (an insurance company with VAT-exempt activities) and its wholly-owned subsidiary, Sampension Administrationsselskab A/S (management company), formed a VAT group in Denmark. When two pension funds acquired 3% each of the management company, Sampension Livsforsikring no longer owned 100% of its capital. Danish law (Paragraph 47(4) of the Law on VAT) requires 100% ownership for VAT groups including non-taxable or exempt entities. Consequently, the Danish tax authorities denied the re-registration of the VAT group.
Issue: The core issue is whether Denmark’s 100% ownership condition for VAT groups, especially when including entities with exempt or non-economic activities, is compatible with Article 11 of the VAT Directive, which requires “close financial, economic and organisational links” and allows measures to prevent tax evasion/avoidance.
Question to Court: The Østre Landsret (High Court of Eastern Denmark) referred two questions to the General Court: 1) Is Article 11 of the VAT Directive to be interpreted as precluding national legislation that imposes a 100% ownership condition for VAT groups including non-taxable/exempt persons? 2) If so, does Article 11 of the VAT Directive have direct effect, allowing taxable persons to be registered as a VAT group even if national law does not comply?
Decision: The General Court ruled:
1. Article 11 of the VAT Directive precludes a Member State’s legislation that requires 100% ownership for VAT groups including persons carrying out exempt or non-economic activities, unless this requirement constitutes a necessary and appropriate measure to combat tax evasion or avoidance.
2. Article 11 of the VAT Directive does not have direct effect, meaning taxable persons cannot directly rely on it against their Member State to form a VAT group if the national legislation is incompatible and cannot be interpreted consistently with it.
Justification:
- For the first question, the Court reasoned that a 100% ownership condition goes beyond the concept of “close financial links” as interpreted by EU case law, which does not require subordination or 100% ownership as a necessary condition. While Member States can implement measures against tax evasion/avoidance, the mere reduction in tax revenue from applying the VAT group scheme is not tax evasion. A 100% ownership condition might not be proportional if less restrictive measures can achieve the objective and may violate fiscal neutrality by treating comparable economic operators differently based solely on capital structure, not a real risk of avoidance. It is for the national court to assess proportionality and fiscal neutrality.
- For the second question, the Court reiterated previous rulings that Article 11 (like its predecessor, Article 4(4) of the Sixth Directive) is conditional and not sufficiently precise or unconditional to have direct effect, as its application requires national provisions to define the scope of “close links.” However, national courts still have an obligation to interpret national law in conformity with EU law to the greatest extent possible.

Article in EU VAT Directive

Article 11 of the EU VAT Directive 2006/112/EC.

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 ofthat 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.

Facts & Background

Parties Involved:
- Applicant: Sampension Livsforsikring A/S, a customer-owned insurance company in Denmark, engaged in life insurance and various financial services, including labor market and company pensions.
- Defendant: Skatteministeriet (Ministry of Taxation, Denmark).
Legislative Context:
- The dispute revolves around the interpretation of Article 11 of Council Directive 2006/112/EC regarding the common system of value-added tax (VAT). This directive has been implemented in Denmark through Paragraph 47(4) of the Danish VAT law (momsloven).
Background of the Dispute:
- Prior Structure: Until January 1, 2017, Sampension Livsforsikring A/S was part of a VAT group with Sampension Administrationsselskab A/S, which managed various administrative tasks for Sampension and two other pension funds not included in the group.
- Change in Ownership: In late 2016, Sampension Livsforsikring A/S allowed two pension funds to acquire a 3% stake in Administrationsselskab, resulting in Sampension no longer owning 100% of the shares. Consequently, the VAT group ceased to exist as it no longer met the 100% ownership requirement under Danish law.
Request for Joint Registration:
- On January 15, 2019, Sampension Livsforsikring A/S requested permission from the Danish Tax Agency to be re-registered as a joint VAT group with Administrationsselskab, arguing that the 100% ownership requirement was inconsistent with EU law, particularly Article 11 of the VAT Directive.
- At the time of the request, Sampension owned 94% of Administrationsselskab.
Decisions by Tax Authorities:
- The Danish Tax Agency rejected the request on February 8, 2019, citing the lack of 100% ownership. This decision was upheld by the Landsskatteretten (National Tax Tribunal) on December 13, 2021, which ruled that the requirement of full ownership was not satisfied and that Sampension could not rely directly on Article 11 of the VAT Directive as it does not have direct effect.
Referral to the Court:
- Sampension Livsforsikring A/S appealed the decisions to the Retten i Lyngby (Lyngby District Court), which subsequently referred the case to the Østre Landsret (High Court of Eastern Denmark) due to the case raising significant legal questions regarding the interpretation of EU VAT law.
Current Ownership Structure:
- The ownership of Sampension Administrationsselskab A/S currently includes Sampension Livsforsikring A/S (88%), along with minority stakes held by other pension funds.

The background of this case is crucial for determining the compatibility of national VAT regulations with EU law and the implications for VAT group registrations, especially concerning ownership requirements.

Questions

(1) Is the first paragraph of Article 11 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax, read in conjunction
with the second paragraph thereof, to be interpreted as precluding legislation of a Member State, such as that at issue in the present case, under which eligibility for creating a VAT group comprising persons not engaged in activity subject to registration or not engaged in economic activity subject to the condition that one
person in the VAT group directly or indirectly owns 100% of the other person or persons in the VAT group?
(2) If question 1 is answered in the affirmative, does Article 11 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax then have direct effect in the Member States, with the result that taxable persons are entitled, vis-à-vis a Member State, to be registered as a VAT group in cases where the legislation of that Member State does not comply with that provision and cannot be interpreted in accordance therewith

AG Opinion

Article 11 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax

must be interpreted as not precluding legislation of a Member State under which eligibility to form a VAT group comprising persons carrying out activities exempt from VAT or not engaged in economic activity, within the meaning of Article 9(1) of Directive 2006/112, is subject to one person in the VAT group owning, directly or indirectly, 100% of the other person or persons in the VAT group, in so far as that legislation is intended to prevent tax advantages arising from the application of the VAT group scheme other than those connected with simplifying administration, and complies with the principles of proportionality and fiscal neutrality.

Judgment

1. Article 11 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax

must be interpreted as precluding legislation of a Member State which makes eligibility to form a value added tax (VAT) group, comprising, on the one hand, persons carrying out activities subject to VAT and, on the other, persons carrying out activities exempt from VAT or not engaged in economic activity, subject to the condition that one person in the VAT group owns, directly or indirectly, all of the capital of the other person or persons in that VAT group, unless that requirement constitutes a necessary and appropriate measure for attaining the objectives of combating tax evasion or avoidance;

2. Article 11 of Directive 2006/112

must be interpreted as not having direct effect allowing taxable persons to rely on it against their Member State in the event that that State’s legislation is not compatible with that provision and cannot be interpreted in a manner consistent with it.

Source

Curia

Other ECJ cases referred to

Finanzamt für Körperschaften Berlin, C‑868/19 (15 April 2021): This case clarified the interpretation of “close financial links” under Article 11 VAT Directive, emphasizing it shouldn’t be interpreted narrowly and a relationship of subordination isn’t a necessary condition. It also addressed Member States’ margin of discretion in imposing restrictions to prevent abuse, stressing proportionality and fiscal neutrality.
Finanzamt T (Internal supplies within a VAT group), C‑269/20 (1 December 2022): This judgment affirmed that Article 11 of the VAT Directive, concerning VAT groups, is not a derogating or special provision that should be interpreted narrowly. It reinforced the broad application of the VAT group concept.
Commission v Sweden, C‑480/10 (25 April 2013): This case established that Member States cannot impose conditions on eligibility to form a VAT group beyond being established in the territory and having close financial, economic, and organisational links, as specified in Article 11 of the VAT Directive.
Commission v Finland, C‑74/11 (25 April 2013): Similar to the Sweden case, this judgment confirmed that Member States cannot add extra conditions beyond those specified in Article 11 of the VAT Directive for forming a VAT group.
Norddeutsche Gesellschaft für Diakonie, C‑141/20 (1 December 2022): This ruling, concerning the predecessor to Article 11, clarified that a national law requiring a majority of voting rights in addition to a majority shareholding to establish close financial links was precluded, influencing the current understanding of “close financial links.”
Larentia + Minerva and Marenave Schiffahrt, C‑108/14 and C‑109/14 (16 July 2015): This seminal case addressed the direct effect of the VAT group provision (then Article 4(4) of the Sixth Directive). It concluded that the provision lacked direct effect because its implementation required national legislative measures to define the scope of close links. It also touched upon proportionality in anti-abuse measures.
Finanzamt T II, C‑184/23 (11 July 2024): This judgment affirmed the principle that transactions carried out for remuneration between members of the same VAT group are not subject to VAT, highlighting a key consequence of forming such a group.
Dyrektor Izby Administracji Skarbowej w Warszawie (VAT – Fictitious acquisition), C‑114/22 (25 May 2023): This case generally confirms the principle that taxable persons are free to choose their organisational structures and transaction forms to best suit their economic activities and manage tax burdens, within legal limits.
Magoora, C‑414/07 (22 December 2008): This judgment highlights the cooperative role of the CJEU, stating that it can provide national courts with all necessary guidance when answering preliminary ruling questions, even if not explicitly asked.
Swedish Match (Simplified justification arrangements), C‑322/25 (13 May 2026): Cited by analogy, this case provides guidance on assessing whether a measure is “appropriate” for achieving an objective, stating it must genuinely and systematically reflect a concern to attain that objective.
Popławski, C‑573/17 (24 June 2019): This case clarifies the obligation of national courts to disapply national law conflicting with directly effective EU law. Conversely, it states that non-directly effective EU law cannot be relied upon to disapply national law.
technoRent International and Others, C‑844/19 (12 May 2021): This judgment reaffirms the principle of interpreting national law in conformity with EU law. It underscores the national court’s duty to consider national law comprehensively to ensure full effectiveness of EU law.

See also

Roadtrip through ECJ Cases – Focus on ”VAT Grouping” (Art. 11) – 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

Podcasts & briefing documents: VAT concepts explained through ECJ/CJEU cases on Spotify

Article

Executive Summary

This briefing reviews a significant General Court judgment concerning Article 11 of the VAT Directive, which governs the formation of VAT groups. The judgment addresses two key questions:

100% Ownership Condition: The Court ruled that national legislation imposing a 100% ownership condition for forming a VAT group (especially when including exempt or non-economic activity entities) is generally precluded by Article 11 of the VAT Directive. This is unless the Member State can demonstrate that such a condition is a necessary and appropriate measure specifically designed to combat tax evasion or avoidance. The Court provided strong guidance suggesting this is unlikely.
Direct Effect of Article 11: The Court reiterated that Article 11 of the VAT Directive does not have direct effect. This means taxable persons cannot directly invoke it against a Member State if national law is incompatible and cannot be interpreted consistently with it. National courts, however, remain obligated to interpret national law in conformity with EU law where possible.

For professionals navigating the complexities of EU VAT law, staying abreast of such rulings is critical. Resources like VATupdate.com are designed to provide “clear, timely, and expertly curated insights” into these developments, offering “concise case summaries, legal analysis, and relevant updates.”

Background: The Sampension Case and Danish VAT Law

The judgment arose from a request for a preliminary ruling from Denmark concerning Sampension Livsforsikring A/S, an insurance company partially exempt from VAT, and its management subsidiary.

Danish Law (Paragraph 47(4) momsloven): Permitted VAT groups, but imposed a strict condition:

“The grant of that authorisation shall be subject to the condition that one of the persons (inter alia, the parent company) be the owner of the other person or persons (inter alia, subsidiaries and sub-subsidiaries) registered under the same number, inter alia by directly or indirectly holding all of their capital.” (Paragraph 4, Source 2) This is referred to as the “100% ownership condition.”

The Dispute: Sampension’s VAT group with its management company ceased when two pension funds acquired 3% each of the management company’s capital, breaking the 100% ownership link. Sampension challenged this, arguing the 100% ownership condition violated Article 11 of the VAT Directive.

2. Main Themes and Important Ideas/Facts

Interpretation of Article 11 of the VAT Directive – VAT Groups

Article 11 allows Member States to treat “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” as a single taxable person. It also permits Member States to “adopt any measures needed to prevent tax evasion or avoidance” through this provision.

Purpose of VAT Groups:

Simplifying administration.
Combating abuses like “the splitting-up of one undertaking among several taxable persons so that each might benefit from a special VAT scheme.” (Paragraph 16, Source 2)
A VAT group is treated as a single taxable person, meaning internal transactions are not subject to VAT.

Member State Discretion and Limits:

The formation of VAT groups is optional for Member States.
While Member States have a margin of discretion, they cannot impose conditions on eligibility “other than the condition of being established in the territory of that Member State and that of being closely bound to one another by financial, economic and organisational links.” (Paragraph 21, Source 2)

The 100% Ownership Condition (First Question)

The Court examined whether Denmark’s 100% ownership condition is compatible with Article 11.

Conflict with “Close Financial Links” (Article 11, first paragraph):

The concept of “close financial links” must be interpreted autonomously and uniformly across the EU.
Article 11 is not a derogating provision and should not be interpreted narrowly.
A 100% ownership requirement “goes beyond what is meant by the condition relating to close financial links.” (Paragraph 25, Source 2)
The Court explicitly stated: “although a relationship of subordination, inter alia in the form of the 100% ownership of capital, can make it possible to presume that relations between the entities concerned are close, it cannot be a condition necessary for the formation of a VAT group.” (Paragraph 26, Source 2)
Key implication: Close financial links can exist even with less than 100% ownership.

Assessment as an Anti-Evasion/Avoidance Measure (Article 11, second paragraph):

Member States can impose restrictions to prevent abusive practices or combat tax evasion/avoidance, provided they respect EU law principles, particularly proportionality and fiscal neutrality.
Critique of Denmark’s Argument:The “mere existence of a tax advantage” from using a VAT group is not, in itself, “tax evasion or avoidance.” (Paragraph 33, Source 2)
Taxable persons are generally free to choose structures to “limit their tax burdens.” (Paragraph 35, Source 2)
A “purely theoretical risk of tax evasion or avoidance cannot form the basis of a general and absolute rule which restricts access to the VAT group scheme.” (Paragraph 37, Source 2)
Proportionality Test: The referring court must assess if the 100% ownership condition is “necessary and appropriate” for combating tax evasion/avoidance. The Court provided strong guidance:
The tax advantage of including an exempt entity in a VAT group is the same regardless of whether ownership is 100% or less, as long as “close financial links” are met.
The condition “makes a distinction not on the basis of a real risk of tax avoidance, but on the sole basis of the capital structure of the group.” (Paragraph 39, Source 2)
“Systematic exclusion on the basis of an abstract criterion, which is not connected to a real risk of tax evasion or avoidance, may go beyond what is necessary to achieve that objective.” (Paragraph 39, Source 2)
Fiscal Neutrality Test: The condition might also violate fiscal neutrality by treating economic operators in comparable situations (i.e., those with “close financial, economic and organisational links”) differently based solely on capital ownership.

Ruling on Question 1: The Court ruled that Article 11 “must be interpreted as precluding legislation of a Member State which makes eligibility to form a VAT group… subject to the condition that one person in the VAT group owns, directly or indirectly, all of the capital of the other person or persons in that VAT group, unless that requirement constitutes a necessary and appropriate measure for attaining the objectives of combating tax evasion or avoidance.” (Point 1 of the ruling, Source 2)

3. Direct Effect of Article 11 VAT Directive (Second Question)

The Court addressed whether Article 11 has direct effect, allowing individuals to invoke it against a Member State.

Definition of Direct Effect: A provision of EU law has direct effect if it is “unconditional and sufficiently precise.” (Paragraph 45, Source 2)
Precedent from Larentia + Minerva: The Court referred to its 2015 judgment in Larentia + Minerva and Marenave Schiffahrt (C‑108/14 and C‑109/14), which dealt with Article 4(4) of the Sixth Directive (the predecessor to Article 11 VAT Directive). That judgment concluded that Article 4(4) did not have direct effect.
Reason for Lack of Direct Effect: Article 11 is “conditional inasmuch as it involves the application of national provisions determining the actual scope of such links” (financial, economic, organisational). (Paragraph 18, Source 2, referring to earlier case law; reiterated in Paragraph 47)
Ruling on Question 2: The Court concluded that Article 11 “must be interpreted as not having direct effect allowing taxable persons to rely on it against their Member State in the event that that State’s legislation is not compatible with that provision and cannot be interpreted in a manner consistent with it.” (Point 2 of the ruling, Source 2)
Implication for National Courts: While direct effect is absent, national courts still have an obligation “to interpret national law in conformity with EU law… to ensure the full effectiveness of EU law.” (Paragraph 52, Source 2) This means attempting to interpret existing national legislation in a way that aligns with the spirit and requirements of Article 11, even if they cannot disapply incompatible national law directly.

III. Key Takeaways and Implications

Challenging Strict VAT Group Conditions: Member States cannot arbitrarily impose overly restrictive conditions for VAT group formation, particularly those like a 100% ownership rule, that go beyond the “close links” requirement of Article 11. Any such conditions must be demonstrably “necessary and appropriate” to combat specific tax evasion or avoidance risks, not just to prevent a general loss of tax revenue.
Importance of Proportionality and Fiscal Neutrality: These principles are crucial in assessing the legality of national VAT grouping rules. Blanket restrictions based on abstract criteria are likely to be disproportionate.
No Direct Recourse for Taxable Persons: While the Court clarified the boundaries of national discretion, taxable persons cannot directly invoke Article 11 to demand VAT group treatment if their national law is inconsistent. Their recourse lies in challenging national legislation through the national courts, relying on consistent interpretation or, potentially, state liability claims for non-compliance.
Role of National Courts: National courts are tasked with applying the Court’s interpretation of Article 11 and, where possible, interpreting national law in a way that aligns with EU law, even without direct effect.
Dynamic EU VAT Landscape: This ruling underscores the ongoing evolution of EU VAT law and the critical role of ECJ/CJEU judgments in shaping its application across Member States.

For professionals, understanding these nuances is “essential” for making “informed decisions based on EU VAT case law.” (Source 1: “New Note”) Staying updated through platforms like VATupdate.com becomes invaluable for navigating such complex legal interpretations and their practical implications.