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Brussels, 24 June 2010

VAT: Commission refers seven Member States to Court over grouping rules

The European Commission has decided to refer The Netherlands, Ireland, Finland, Sweden, United Kingdom, the Czech Republic and Denmark to the EU's Court of Justice with regard to their failure to respect their obligations under EU law as regards VAT grouping rules. VAT grouping is allowed for the purpose of administrative simplification under the VAT Directive, which gives Member States the option to treat those who are legally independent but closely bound to one another by financial, economic and organisational links as one single taxable person.

In July 2009, the Commission adopted a Communication on the VAT grouping option, setting out how the provisions on VAT grouping in EU legislation should be applied in practice, in a way that respects the basic principles of the EU VAT system and ensures that it has no adverse impact on the Internal Market.

Having examined national provisions on this issue, the Commission found that the legislation in seven Member States was incompatible with the EU rules on VAT grouping. For The Netherlands, Ireland, Finland, UK, Czech Republic and Denmark, the problem is that they allow non-taxable persons to join a VAT group. This is not in line with the provisions of the VAT Directive. Proceedings against Sweden and Finland are due to the fact that these Member States limit the VAT grouping system to financial and insurance services. EU VAT grouping rules do not allow for such a sectoral limitation. For The Netherlands, the proceedings also cover the failure to notify changes to the application of their VAT grouping scheme to the VAT Committee.

As these problems persist in these Member States, the Commission has now decided to refer them to the EU's Court of Justice.

Press releases on infringement proceedings in the field of taxation and the customs union can be consulted at:

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