European Court blocks EC’s attempt to change Swedish VAT group rules

Tue 28th May 2013

The European Court of Justice, the highest court of appeal for European law, has blocked the European Commissions attempts to change Swedish VAT rules on groups.  The case concerned which companies may join the VAT group of a financial services and insurance group.

EU countries may introduce national rules on VAT Groups

The EC claimed the Swedish restriction on only financial and insurance companies being able to join the same VAT group was in contravention of the EU’s VAT Directive.  VAT groups enable related companies in the same country to report on the VAT as a single taxable person.  This helps reduce the administrative burden and cash flow losses or delays where the group companies provide taxable supplies to each other.

The ECJ found that the VAT Directive did not restrict member countries, such as Sweden, from put additional restrictions on VAT Groups, especially if to prevent abusive constructions to aggressively avoid VAT.