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Skandia VAT grouping ECJ case

Significant CJEU decision in Skandia VAT Grouping case

Ryan Bevan 29 August 2015 No comments

 

Further to our earlier article on the AG’s Opinion, the CJEU have now published their final decision in this case (Skandia America Corporation USA C-7/13). This decision is likely to have a significant impact for any international business operating through VAT Group structures in the EU.

In summary, the CJEU has ruled that if there is an EU branch of an overseas entity in a VAT group, charges from the head office to the branch cannot be disregarded for VAT purposes. This is on the basis that the transactions are actually from the head office to the VAT group as a whole, and since the head office and the VAT group are (for VAT purposes) considered different taxable persons, these constitute taxable transactions on which the VAT Group is liable to pay VAT.

This could have considerable cost implications for international businesses affected by the decision that are partly exempt and therefore unable to fully recover the VAT now chargeable on such transactions. International businesses need to consider whether they are affected by this decision and, if so, what action may be required to comply with the ruling.