VAT grouping: Final verdict of the German Federal Fiscal Court in Finanzamt
GermanyThe issue of the taxability of intra-group supplies in the context of a VAT group has been of concern to taxpayers for many years. The starting point was the question of whether a VAT group existed between a foundation under public law, which carried out both taxable and non-taxable transactions, and a limited liability company, which provided cleaning services for both the business and non-business areas of the foundation, and whether such supplies were subject to VAT.
The BFH concurred with the CJEU's prior ruling, affirming the existence of a VAT group and confirming that intra-group transactions among its members are outside the scope of VAT, even in cases where one of the parties, such as the foundation in this instance, is subject to input tax deduction restrictions. The BFH further clarified that the non-business segment of a controlling company falls within the scope of the VAT group. Consequently, services provided by a controlled company to the non-business area of the controlling company are also not subject to VAT.
In general, the previous CJEU judgements confirmed that the concept of the German VAT group, according to which the controlling company is liable for the whole group’s VAT, is compatible with EU law.
Key takeaway
The BFH's confirmation of the CJEU judgement has clarified the dispute regarding the taxability of intra-group transactions in the VAT group. This will be welcomed by many taxpayers, especially those in the finance, insurance and healthcare sectors. This legal dispute was intensively monitored by our tax law team for years. Interested readers can access further information here.
