The Field of Application of the Cost-sharing exemption in Art. 132 (1)(f) of the EU VAT Directive and the Swedish implementation

Abstract: The cost-sharing exemption provided by Art. 132(1)(f) EVD is a provision with a specific objective. The legal function of the provision is to enable economic operators which carry on exempt activities to emancipate certain internal sources which are directly necessary to carry on the exempt activity to be outsourced, and thus supplied exempt. Under the framework of a cost-sharing arrangement, the members of the cost-sharing group organise a “cooperative self-supply”. By doing this, the objective of the provision is to enhance efficiency among small and medium seized undertakings in relation to big enterprises, to organise specific internal services to achieve scale of economics. Even though the provision is a mandatory provision, the conditions set out in Art. 132(1)(f) EVD to be fulfilled has been surrounded with uncertainty by Member States of how to implement and apply the provision. And to this effect of ambiguity, the ECJ case-law in this matter consists of three settled cases which does not entirely enlightens the scope of application of the provision. In this respect, the Commission has submitted several documents which are of a great value to understand the scope of application of Art. 132(1)(f) EVD. The abovementioned uncertainty and ambiguity can be illustrated in the Swedish implementation of the cost-sharing exemption. In the Swedish case, a taxable person can invoke the direct applicability of the EU VAT provision and rely on Union interpretation of the cost-sharing exemption. With respect to the specific character of the provision and having regard to the possibilities of VAT Grouping, the effective use of the cost-sharing exemption is suitable for EU cross-border transactions. In respect to Sweden, with regard to a recent national case, the cost-sharing exemption is suitable for insurance claim handling services on an EU cross-border situation.