Issue
- A Head Office and its Branch are considered as one taxable person for VAT purposes
- As a consequence, supplies of services between a Head Office and its Branch are outside scope of VAT
- However, if either the Head Office or the Branch is part of a VAT group, is the Head Office – Branch still to be considered as one taxable person for VAT purposes?
Relevant articles in the EU VAT Directive 2006/112/EU
Article 9(1) (Taxable person)
1. “Taxable person” shall mean any person who, independently, carries out in any place any economic activity, whatever the purpose or results of that activity.
Any activity of producers, traders or persons supplying services, including mining and agricultural activities and activities of the professions, shall be regarded as “economic activity”. The exploitation of tangible or intangible property for the purposes of obtaining income therefrom on a continuing basis shall in particular be regarded as an economic activity.
2. In addition to the persons referred to in paragraph 1, any person who, on an occasional basis, supplies a new means of transport, which is dispatched or transported to the customer by the vendor or the customer, or on behalf of the vendor or the customer, to a destination outside the territory of a Member State but within the territory of the Community, shall be regarded as a taxable person.
Article 11 (Taxable person – VAT grouping)
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 of that 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.
ECJ Cases – Decided
- ECJ cases C-7/13 (Skandia) – Supply of services between head office and branch part of VAT group constitutes a taxable transaction
- ECJ case C-812/19 (Danske Bank) – Head Office part of VAT group & its Branch are separate taxable persons
