Comments on the recent decisions raised by the ECJ regarding the VAT exemption in the recharging of costs to the members of an IGP
On 21 September, the ECJ Union has published three similar judgments (C326/15; C616/15 and C605/15), which analyses the possible exemption in VAT from the re-charging of costs for services received that an Independent Group of Persons (IGP) carry out to the group members.
These judgments come to deny the application of the VAT exemption of the services provided by the ICG to its members, previously commented, on the basis that do not concur the article 132.1 conditions. f) of Directive 2006/112/EC.
Exemptions for certain activities in the public interest
- Member States shall exempt the following transactions:
(f) the supply of services by independent groups of persons, who are carrying on an activity which is exempt from VAT or in relation to which they are not taxable persons, for the purpose of rendering their members the services directly necessary for the exercise of that activity, where those groups merely claim from their members exact reimbursement of their share of the joint expenses, provided that such exemption is not likely to cause distortion of competition;
The main reason for which the European Court of Justice denied exemption from the above services is the companies of the groups do not perform activities of general interest, but they are from the financial sector or insurance companies.
Furthermore, the application of the exemption requires that the groupings are limited to require from their members the exact reimbursement of the part related to them in all expense incurred in common, not including any margin, as well as the services must be directly necessary for the exercise of that activity.
At this point, it should be clarified that there is no retroactive application of these judgments. However, from now on, groupings of companies in the insurance, and financial sectors in addition to any other whose activity is not of general interest, may not apply this VAT exemption.
This leads to consider the usefulness of these groupings and the possible reformulation of them under a different legal framework. This could encourage an evolution of the VAT Group Special Regime.
In addition, it should be noted that the Spanish Tax Authorities has ruled in a similar way, denying the right to this exemption (contained in article 20.Uno.6º of the Spanish VAT Law) through some recent binding tax rulings issued by the General Tax Sub-directorate.