CJEU: supplies provided within VAT group not subject to tax
In case C 184/23 Finanzamt T, the CJEU dealt with a dispute between the German tax administration and a foundation governed by public law. In the same case, judgment C 269/20 had already been delivered, which dealt with a VAT group and the supplies made within that group. The case has then returned to the CJEU with further preliminary questions.
Foundation S was the controlling entity of company U and of a university operating a teaching hospital. Company U provided cleaning, sanitation, and other services to foundation S for the entire building complex that foundation S managed. Foundation S carried out its own economic activity in this building compound, but also used a part of the complex for education – in this case acting as a public authority and not regarded a taxable person.
The German court again returned to the CJEU with questions as to whether supplies made between persons forming a VAT group must be subject to VAT, and whether the supply recipient not being entitled to deduct input tax should be considered in this context.
The CJEU held that the supply of a service is taxable only if there is a legal relationship between the supplier and the supply recipient under which supplies are exchanged. This means cases where the provided consideration represents the actual counter-value for the supply made by the supplier to the recipient. To determine whether such a legal relationship exists, it must be ascertained whether the provider of the supply carries out an economic activity independently.
Furthermore, the CJEU held that once a person becomes part of a VAT group, the EU VAT Directive precludes them from being regarded as a taxable person on a separate basis, whether in relation to other persons or to persons within in the group, and from filing a separate VAT return. Only one person is entitled to file a VAT return for the VAT group. It follows from this assumption that when a service is supplied by a member of a VAT group to another person within that group, there is no need to examine the condition of independence - such a supply will always be outside the scope of VAT.
The CJEU also reiterated that a VAT group acts as a single taxable person for VAT purposes, i.e., it is not the individual members who are entitled to the deduction but the group as a whole. The fact that the recipient of the supply was not entitled to the deduction therefore has no bearing on whether supplies made between members of the group are subject to output VAT.
Thus, the CJEU merely confirmed that supplies provided within the VAT group do not fall within the scope of tax, and the fact that the recipient of the supply could not benefit from the right to deduct does not alter this conclusion.