Insights
VAT
Internal supplies within a VAT group are not taxable
The Court of Justice of the European Union (CJEU) found that supplies between members of a VAT group are irrelevant for VAT purposes and do not give rise to a tax liability.
A VAT group exists when several legally independent companies are so closely linked that they are treated as a single entity for VAT purposes. In this structure there is a so‑called group parent (Organträger), which owes the VAT for the whole group to the tax office. Internal supplies (Innenumsätze) are supplies made between the members of a VAT group, for example when a subsidiary provides services to its parent company within the group.
Judgment of the Court of Justice of the European Union (CJEU)
Recently the CJEU delivered a judgment on the VAT liability (= value added tax, VAT) of so‑called internal supplies within a VAT group. The CJEU held in the proceedings that the individual members of a VAT group are no longer to be treated as separate taxable persons, but jointly as a single taxable person. Because the status of taxable person is lost, any possible independence of the individual group members when providing a supply to other group members no longer needs to be examined.
These supplies therefore fall outside the scope of the VAT Directive. The CJEU consequently decided that such internal supplies within a VAT group are not subject to VAT. This applies even where the recipient of the supply is not entitled to deduct input tax and any VAT that might arise would not be a pass‑through.
Since Austria has exercised the optional right to establish a VAT group, this CJEU decision is also relevant for Austria, and it determines how internal supplies of a VAT group are to be dealt with in Austria.
Conclusion
The CJEU decision provides clarity for companies that are part of a VAT group. They can be confident that supplies between group members are not subject to VAT, regardless of whether the recipient is entitled to input‑tax deduction. This clarification considerably eases the VAT treatment within corporate groups. Apart from that, regular questions can arise when assessing VAT aspects of transactions. These can be resolved through early planning and comprehensive advice.
Judgment of the Court of Justice of the European Union (CJEU)
Recently the CJEU delivered a judgment on the VAT liability (= value added tax, VAT) of so‑called internal supplies within a VAT group. The CJEU held in the proceedings that the individual members of a VAT group are no longer to be treated as separate taxable persons, but jointly as a single taxable person. Because the status of taxable person is lost, any possible independence of the individual group members when providing a supply to other group members no longer needs to be examined.
These supplies therefore fall outside the scope of the VAT Directive. The CJEU consequently decided that such internal supplies within a VAT group are not subject to VAT. This applies even where the recipient of the supply is not entitled to deduct input tax and any VAT that might arise would not be a pass‑through.
Since Austria has exercised the optional right to establish a VAT group, this CJEU decision is also relevant for Austria, and it determines how internal supplies of a VAT group are to be dealt with in Austria.
Conclusion
The CJEU decision provides clarity for companies that are part of a VAT group. They can be confident that supplies between group members are not subject to VAT, regardless of whether the recipient is entitled to input‑tax deduction. This clarification considerably eases the VAT treatment within corporate groups. Apart from that, regular questions can arise when assessing VAT aspects of transactions. These can be resolved through early planning and comprehensive advice.