What was on the test bench?
The Advocate General's understanding of the tax group deviated from the VAT Act in three key points. According to this:
- the taxable person is not the controlling company, but the VAT group,
- financial integration is not a prerequisite for the fiscal unity and
- entry into the fiscal unity must not be associated with the loss of independence for the controlled companies.
The ECJ ruling and the consequences
Controlling company as taxpayer
In principle, the ECJ sees the VAT group as the taxable person, but considers it permissible to designate the controlling company as the sole taxable person, provided that no tax losses occur. This is guaranteed due to the existing liability rules.
Consequence: The regulation of the UStG remains in force, according to which the controlling company is the sole taxpayer. Assessments no longer have to be kept open in this respect.
Financial inclusion
Here, the ECJ opposes the "German" view. Although financial integration is required, this only requires a majority shareholding. A majority of voting rights, on the other hand, is not necessary.
Consequence: Nothing changes for existing fiscal unities. On the other hand, the group of companies that are eligible for a fiscal unity is expanded, since the requirement of a majority of voting rights no longer applies.
Independence of the controlled companies
According to the ECJ, it is not permissible to consider controlled companies as non-independent simply because they are part of the group of controlled companies.
Consequence: Up to now, turnover within a fiscal unity has been considered non-taxable. The ECJ's statement may mean that this will no longer be the case in future.
Need for action for you?
It is necessary to check whether the ruling results in a need for action for you or your group of companies. This may result from the reduced requirements for financial integration, but also from the possible taxability of intercompany sales and the resulting consequences for the deduction of input tax. Whether this is to be assessed positively or negatively depends on the individual case. For example, groups of companies may benefit from the expansion of the companies eligible for a tax group, while others will not be happy about this. Insofar as advantages arise for you, it must at least be ensured that the corresponding assessments are kept open. In addition, the subsequent rulings of the Federal Fiscal Court, the subsequent reactions of the tax authorities and the further rulings of the ECJ must be taken into account. At the same time, in another case, the ECJ denied the taxation of a free transfer of value if a controlled company provides a service for the sovereign domain of the controlling company.
We will inform you about further developments in a timely manner. Our VAT experts will be happy to answer any questions you may have.