The Complexities of VAT Grouping

Abstract

This article deals with developments in 2021 in respect of the impact of VAT grouping on the VAT treatment of intercompany transactions. The main development in 2021 was the ECJ decision in Danske Bank in which it was ruled that a transaction between a Danish VAT group and a Swedish branch was in scope of VAT. The decision makes it more important to determine whether a VAT fixed establishment is in place and whether a VAT group is in place. The Italian tax authorities appear to be going even one step further by also treating transactions between a local fixed establishment and a non-EU VAT group as being in scope of VAT. The implementation of a VAT grouping regime in France also broadens the implications of Danske Bank. A pending case at the Dutch Supreme Court may change this, as it is being questioned whether the current limitations under the concept of VAT grouping may form a breach of fundamental EU principles on freedom of establishment, but proceedings have not been in the taxpayer’s favour so far.