ECJ’s resolution, of September 17th, 2014. VAT Group. Taxable services supplied by a non-resident headquarter to its branch belonging to a VAT group


The decision of the Court of Justice of the EU partially changes the idea remained so far regarding the non-taxable services provided between headquarters and its branch.

In this case an established US headquarter provides IT services to their branch established in a Member State of the EU, which belongs to a group of VAT in that Member State, and without charging the VAT to the branch for those services. However, the tax authorities of the Member State considers that these services constitute a taxable transaction, located in the Member State where the branch is established and, therefore, are subject to tax.

First, it should be recalled that the Case-Law of the Court of Justice of the EU, in respect to services provided between a headquarter and its branch is to consider those services not subject to VAT, to the extent that a headquarter and the branch are the same legal entity and therefore there is not a transaction of an economic nature between both parties. In this sense, the Court is pronounced in this case following such criterion, noting that the branch does not perform an independent economic activity of the headquarter, nor take risks for herself, so is totally dependent of the parent entity.

However, the Court clarifies that, to the extent that the branch is part of a VAT group, the services received should not be deemed made with an individual member of the group (the branch), but with the VAT own group itself as a single taxable person and, therefore, a totally independent entity for VAT purposes.

Thus, the Court resolves in favour of the tax authorities to consider the services provided by the parent entity in the United States as an economic operation with an independent third party, the VAT group, and not with their own branch, leading to consider the same subject to VAT.

A copy of the judgment C-7/13 is attached.

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ECJ C 7_13 VAT Group. Services supplied to a branch

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