Friday, October 31, 2014
VAT: Revenue release e-Brief regarding Head Office to branch supplies where the branch is a member of a VAT group – aftermath of the ECJ decision in Skandia (Case C-7/13)
The ECJ Decision
In September, the ECJ in Skandia America Corp. (USA), filial Sverige v. Skatteverket (the Swedish tax authorities) Case C-7/13, held that, for VAT purposes, where a company provides services to a foreign branch:
a) for consideration; and
b) where that branch belongs to a VAT group;
then the services should be regarded as having been provided to the VAT group and not the branch. The consequence of this is that previously ignored transactions may now be treated as a supply of services upon which VAT is now due.
As we have previously commented the widely documented decision could result in a considerable departure from the previously generally accepted position – that is that the supply of such services to a branch which is a member of a VAT Group does not give rise to a VAT liability.
ECJ decisions are binding across all EU Member States and it remains to be seen how the decision with take effect. With regard to Ireland however, some indication came in the form of an e-Brief released by Revenue, yesterday, 30 October 2014.
The e-Brief is welcomed, in that it provides confirmation as to the position currently; however there is a suggestion that change may come following the period of consideration. VAT exempt businesses with international branch networks and VAT group structures should therefore continue with (or commence where appropriate) assessments of their corporate structures to establish tax efficient alternatives in anticipation of any legal changes.
For a more in-depth commentary on the ECJ decision in Skandia (Case C-7/13) see here.