• Service: Tax, Global Indirect Tax, Global Compliance Management Services
  • Type: Regulatory update
  • Date: 6/19/2013

Finland - VAT group registration only for financial, insurance sectors 

June 19:  The Court of Justice of the European Union (CJEU) rejected, in part, the EC’s infringement proceedings against the Finnish value added tax (VAT) group registration rules that apply only for the financial and insurance sectors. European Commission v. Finland, C-75/11 (25 April 2013)

Read the judgment C-74/11

KPMG observation

The judgment is viewed as a surprise by tax professionals because it differed from the opinion of the CJEU Advocate General, who had opined that a Finnish VAT group registration rules applicable only for the financial and insurance sectors was against the EU VAT Directive.

According to CJEU judgment, the rules that allow VAT groups only in the financial and insurance sectors is not against the principle of neutrality.

Concerning a question raised by the EC that the limitation is against the principle of equal treatment, the CJEU did not address this because the EC did not raise this issue in its preliminary complaint. So the question whether Finland or any other number of other EU Member States can limit the scope of the grouping rules without a clear qualifying rule under the VAT Directive is still open.

This judgment may be viewed negatively by companies in Finland that operate a business with restrictions on VAT deductions (i.e., members of the same VAT group can handle their mutual transactions without a VAT charge and at no VAT cost).

The EC has not indicated whether it will initiate a new action against the Finnish government, but has suggested that Finnish VAT law is against the principal of equal treatment.

Read a 2013 report prepared by the KPMG member firm in Finland: Finnish VAT grouping rules in ECJ

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