The Concept of Taxable Transactions between Head Office and Branch - In the light of Skandia America

Abstract: The CJEU recently enriched its case law concerning the concept of a single taxable person through its ruling in Skandia America. Established case law differentiate two concepts of single taxable person. According to FCE Bank, a head office and its branch are to be deemed as one single taxable person, with the result that no taxable supplies occur between these entities. In Ampliscientifica, the CJEU stated that several independent persons that are merged together in a VAT group constitutes one single taxable person as they cease to exist separately for VAT purposes. In Skandia America, a clash of these two concepts of single taxable person were encountered. The judgement concerned the VAT treatment of services supplied from a head office located in a third country to its EU established branch which were a member of a VAT group. Contrary to the opinion of Advocate General Wathelet, the CJEU followed the principle set out in Ampliscientifica. Accordingly, supplies of services from a head office to its branch which belongs to a VAT group must be regarded as taxable transactions, since the main establishment and the VAT group are considered as two separate taxable persons. The CJEU in Skandia America undertook an extensive analysis on the concept of a taxable person, while omitting a discussion of the fulfilment of the other criteria necessary for the existences of a taxable transaction as provided for in Article 2(1)(c) of the VAT Directive. This thesis reveals that the ruling in Skandia America may have left out an important discussion on the fulfilment of these requirements to be able to declare the supply of services subject to VAT.