• Service: Tax, Global Indirect Tax, Global Compliance Management Services
  • Type: Regulatory update
  • Date: 4/11/2013

Ireland - CJEU allows non-taxable persons included in VAT group 

April 11:   The Court of Justice of the European Union (CJEU) issued the first judgment in a number of infringement proceedings against EU Member States, and concluded that the inclusion of non-taxable persons in a value added tax (VAT) group does not violate the VAT Directive. Commission v. Ireland, C-85/11 (9 April 2013)

Read text of the judgment: C-85/11


The European Commission released in July 2009 a report on the VAT-group option provided for in the VAT Directive, and then challenged a number of practices on VAT grouping by EU Member States.

Subsequently, the EC announced infringement proceedings against eight Member States (including the United Kingdom) on the grounds of failing to implement EU law correctly by permitting non-taxable persons to be members of a VAT group.

The Irish proceedings were heard separately from the others, and judgment was issued this week. Contrary to the EC’s view, the CJEU confirmed that the practice of permitting non-taxable persons to be members of a VAT group does not infringe Article 11 of the VAT Directive.

KPMG observation

Judgments in the remaining cases (including the one involving the UK) are expected to be issued soon, perhaps in the next two weeks. Observers anticipate that the judgment in the Ireland case on the central point of whether non-taxable persons can be included in a VAT group would be the same in the to-be-issued judgments.

In light of the CJEU’s judgment, it appears that no change is required to VAT grouping rules and if any taxpayer has been refused VAT grouping of a non-taxable entity, these taxpayers may now want to review their position.

Read an April 2013 report [PDF 56 KB] prepared by the KPMG member firm in the UK:
Commission v Ireland – Judgment Released

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