In this case, the UK court asked whether the cost sharing exemption applies to a group which is established across multiple EU countries, or even (partly) outside the EU. It also focuses on the condition that no ‘distortion of competition’ may occur. In addition, the question is raised if the exemption applies if the members of the group form a VAT group, and if the representative of that VAT group (Kaplan International Colleges) is not part of the cost sharing group.
Opinion of the Advocate General in case C-77/19 (Kaplan International Colleges UK Ltd).
1. The exemption in Article 132(1)(f) of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax (‘the VAT Directive’) does not extend to a group which is established in a third state.
2. Article 132(1)(f) of the VAT Directive is to be interpreted to the effect that the exemption of services supplied by a group to its members in return for exact reimbursement of their share of the expenses does not, in principle, cause distortion of competition unless it is applied inappropriately.
Indications of inappropriate use may be, for example:
(1) that the group supplies the same services to a significant extent for consideration to non-members and is to that extent operating on the market primarily as a competitor and less as a cooperative group;
(2) that the group does not supply any services tailored to the specific needs of its members, but only passes on purchased services; or
(3) that the primary purpose of the group’s formation is simply to optimise the input VAT burden rather than to establish reciprocal cooperation with a view to avoiding a competitive disadvantage.
The tax authority bears the burden of proof for demonstrating these indications. It is not, however, required by EU law to commission a specific expert evaluation or similar. The referring court must ultimately assess these indications.
3. The fact that some members of the CSG are also part of a VAT group does not preclude the application of the exemption in Article 132(1)(f) of the VAT Directive. However, the more extensive group taxation on the basis of Article 11 of the VAT Directive prevails. The exemption in Article 132(1)(f) of the VAT Directive does not therefore apply where all the members of the CSG are part of a single VAT group.
Source Curia
