CJEU – Recent Developments in Value Added Tax 2015

I. S. 207Introduction

The answer to the question of whether a supply is taxable or non-taxable is particularly relevant for the determination of the right of deduction in regard to the costs for those taxable or non-taxable transactions.

Supplies between departments of a taxable person, i.e., supplies made within the scope of an economic activity of a single taxable person, are principally non-taxable. This is only different if internal or self-supplies are applicable. Transactions conducted by one taxable person for another taxable person are normally taxable (subject to VAT), however, must meet an important condition: they are only subject to VAT if a legal relationship exists between the supplier and the recipient in which there is a reciprocal performance. This is why supplies between departments of a taxable person, such as those between a head office and its fixed establishment, cannot be subjected to VAT. Hereinafter, the focus will be on supplies of services.

Last year’s main topic in the field of VAT was regarding the question whether transactions between head offices and fixed establishments are considered as non-taxable under all circumstances (‘FCE Bank principle’) or if they ar...