Germany’s Federal Finance Court (BFH) has issued two decisions on the country’s domestic VAT grouping rules, following rulings by the Court of Justice of the European Union (CJEU) on 1 December 2022. The CJEU was asked to decide whether Germany’s VAT law is compatible with EU law. One provision at issue was the rule under which the controlling company in a VAT group, rather than the group itself, is the taxable person for the group. The CJEU concluded that this rule is in line with EU law, but other features of the German VAT grouping rules are not. The BFH has now implemented the CJEU rulings. The most important aspects are that the controlling company is the taxable person in a VAT group, financial integration exists where the controlling company has a majority shareholding in the group companies carrying 50% of the voting rights and where the managing bodies of the two companies are identical, and Germany’s practice that each member of a VAT group must have its own ID will have to be revised. The question of whether intragroup transactions fall within the scope of VAT has been referred back to the CJEU.
Source BDO
See also
- ECJ C-141/20 (Norddeutsche Gesellschaft für Diakonie mbH) – Judgment – VAT group: Controlling member may be the only representative of a VAT group
- C-269/20 (Finanzamt T) – Judgment – Controlling company may be the only taxable person of a VAT group
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