Ireland VAT group case dismissed by ECJ

Tue 16th Apr 2013

The European Court of Justice has ruled on 9 April that non-taxable entities may be included within VAT Groups in an Irish VAT appeal.

The Court found that the terms of the current EU VAT Directive allows for the inclusion of closely-bound economic persons to join the same VAT group if established in the same country.  However, it does not preclude ‘non-taxable’ economic persons.  It highlighted the exact wording of the EU VAT Directive, and its predecessor, the 6th VAT Directive.  The ECJ rejected the European Commission’s view that interpretation should be the other way around.

Ireland had been permitting the inclusion of non-active holding companies in VAT groups, which was enabling the set-off output VAT from other group subsidiaries against the input VAT of the holding companies.  Many other countries permit this practice, including: the UK; Czech Republic; Finland; and Denmark.