VAT group

EU Member States may treat persons in their country that are closely bound to one another by financial, economic, and organisational links as one VAT taxable person. This ‘consolidated’ VAT taxable person is known as a ‘VAT group’ or ‘VAT fiscal unity’.

The essence is that the VAT group is considered one taxable person instead of each of its individual members. It has been long-standing practice in nearly all EU Member States to consider supplies made between members of the VAT group as outside the scope of VAT.

However, this practice was called into question in two ECJ cases that were ruled in 2022. In these rulings, the ECJ considers that members within a VAT group could still independently be engaged in economic activities, potentially drawing the activities between the VAT group members within the scope of VAT.

Judgement

In its long awaiting judgement in the Finanzamt T II case, the ECJ has now ruled that supplies for consideration between members of the same VAT group are not subject to VAT. This is also the case if the members of the VAT group perform activities that do not entitle an input VAT deduction.

Relevance for the practice

This is a very welcome clarification as any lingering doubt, about activities between members of a VAT group not being subject to VAT, should now have finally been put to rest.