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Brussels, 20 November 2009

VAT: The Commission tackles 8 Member States over the application of the VAT grouping rules

The European Commission has formally requested the Netherlands, Ireland, Spain, Finland, Sweden, United Kingdom, the Czech Republic and Denmark to amend their legislation with regard to the application of their VAT grouping schemes. These requests are in the form of a reasoned opinion which is the second stage of the infringement proceedings provided for in Article 226 of the Treaty. If these Member States fail to comply with the reasoned opinion within two months, the Commission may refer the matter to the Court of Justice of the European Communities.

Article 11 of the VAT Directive gives Member States the option, for the purpose of administrative simplification, to regard as one single taxable person those who, while legally independent, are closely bound to one another by financial, economic and organisational links.

In July 2009 the Commission adopted a Communication on the VAT grouping option provided for in the VAT Directive. The Communication set out the Commission's view on how the provisions of Article 11 of the VAT Directive should be translated into practical arrangements whilst respecting the basic principles of the Community VAT system and ensuring that the effects of using the option scheme remain restricted to the Member State applying it.

In addition, the Commission, acting in the framework of its role as guardian of the treaties, examined the national provisions on this issue in order to ascertain their compatibility with Community Law. This examination has resulted in the opening of infringement proceedings against the 8 Member States mentioned above.

The proceedings against Sweden concern the fact that Sweden (2008/2144) limits the VAT grouping system to financial and insurance services. That is also one of the grievances in the proceedings against Finland (2008/2143). According to the Commission the VAT grouping rules in the VAT Directive does not allow for such a sectoral limitation.

Further, the other grievance in the proceedings against Finland concerns the fact that Finland allows the inclusion of non-taxable persons into a VAT group. The proceedings against Ireland (2008/2141), the Netherlands (2004/4719), Spain (20082142), United Kingdom (2008/2145), Denmark (2008/2147) and the Czech Republic (2008/2146) concern the same issue. All these Member States allow non-taxable persons to join a VAT group. And this is not in line with the proper application of Article 11 of the VAT group.

For the Netherlands the proceedings also include the failure to notify changes to the application of their VAT grouping scheme to the VAT Committee.

For the latest information on infringement proceedings, go to:

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