France: Foreign head offices providing services to French branches subject to VAT

The revised guidelines cover both head office/branch and branch-to-branch transactions when one of the parties belongs to a VAT group.

To French branches subject to VAT

The French tax authorities on 29 December 2021 incorporated in their official guidelines the decision of the Court of Justice of the European Union in Skandia America Corporation (C-7/13, 17 September 2014), in which the court determined that:

  • A non-EU head office providing services to its Swedish branch belonging to a local value added tax (VAT) group (set under article 11 of the EU VAT directive) is considered as a transaction in-scope of VAT. 
  • The head office is viewed as dealing with a distinct taxpayer: the VAT group—disregarding the fact that the branch belongs to the same legal entity

Although France has not fully implemented the VAT group regime (reform in process but effective only as from 1 January 2023), recent case law developments confirming the Skandia principles persuaded the French tax authorities to incorporate those principles in their

  • Danske Bank A/S v. Skatteverket, case no. C-812/19 (11 March 2021)—read TaxNewsFlash
  • French Supreme Tax Court (BNP Paribas Securities Services, n°435295 (4 November 2020))—read TaxNewsFlash

The revised guidelines cover both head office/branch and branch-to-branch transactions when one of the parties belongs to a VAT group set up under article 11 of the VAT Directive (European VAT Group). Some examples of standard transactions are provided.

KPMG observation

This late adoption inevitably raises substantial questions regarding the entry into force of these revised guidelines while tax audit inspections already pointed out the treatment of intragroup services provided by foreign head offices to their French branches of foreign entities.

For more information, contact a tax professional with KPMG Avocats in France:

Philippe Breton |  +33 155 684 933 |

Arnaud Moraine | +33 155 684 937 |

Laurent Chetcuti | +33 155 684 887 |


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