Germany: Rules for VAT groups addressed by CJEU Advocate General; other VAT developments

The German Federal Tax court (BFH) referred questions to the Court of Justice of the European Union (CJEU) for a preliminary ruling as to whether the value added tax (VAT) provisions on VAT groupings are compatible with European Union law (CJEU ref.: C-141/20 – Tax Office Kiel; CJEU ref.: C-269/20 – Tax Office T).

The CJEU Advocate General responded as follows:

• EU law allows closely related parties belonging to a VAT group to be viewed as a single taxpayer for the purposes of fulfilling VAT obligations.
• However, EU law precludes an EU Member State regulation determining that only the controlling member of a group—which commands the majority of voting rights and a majority shareholding in the controlling company in the group of taxable person—can be the representative of the VAT group and the party liable to VAT for this group, to the exclusion of the other members of the group.

The Advocate General also touches upon the concept of a VAT group in accordance with EU law. In the Advocate General’s view, taxable persons that belong to a VAT group continue to be liable for taxes as individual persons. The VAT obligations, thus, would exist independently for each separate person (that is, independently of the VAT group). The VAT group serves solely to simplify the treatment of VAT. Specifically, the tax authorities would receive a single VAT return in which the separate or individual returns of the taxable persons belonging to the group are combined.

Tax professionals now await the CJEU’s judgment, and it will be interesting to see if the CJEU take a position on whether, in the case of a VAT group, a company can invoke the EU law, which is more favorable for the company. To the extent it is possible to invoke EU law, the outcome of the CJEU proceedings would be of great importance for all existing VAT groups—even if it has to be examined on a case-by-case basis because of the specific effects resulting from the case law. In particular, the judgment would need to be considered as to whether taxpayers need to keep open final determinations, procedurally, in order to preserve their legal positions.

Read a January/February 2022 report [PDF 434 KB] prepared by the KPMG member firm in Germany.
 

Other recent VAT developments that may affect businesses in Germany include the following items:

• Point in time of the right to deduct input VAT (CJEU, judgment of 10 February 2022 – case C-9/20 – Grundstücksgemeinschaft Kollaustraße 136)
• Reduced VAT rate for supplies of firewood (CJEU, judgment of 3 February 2022 – case C-515/20 – B)
• Distinction between damages and remuneration (BFH, resolution of 26 August 2021, V R 13/19)
• Changes in Intrastat reporting as of 2022