The ECJ has confirmed that the transactions within a VAT group are not subject to VAT
C‑184/23. – Finanzamt T vs. S | The ECJ has confirmed that the transactions within a VAT group are not taxable even if the recipient of the services would not be entitled to recover the input VAT.
The plaintiff in the case is a German foundation governed by public law, which is the controlling company of a university, which also manages a university medicine department, and of the company U-GmbH. These entities formed a VAT group. The building of the university is on one hand utilised for teaching students and there is also a medicine department, including patients’ rooms, corridors and operating premises.
In the German law, teaching in universities qualifies as public authority activity for VAT purposes and as such it is out of scope of VAT, whereas the healthcare services are VAT-exempt. The public foundation ordered the cleaning of the entire university building from the GmbH for EUR 76,085.48. The consideration was treated out of scope of VAT on the ground that the recipient is a member of the same VAT group. However, the German tax authority established that the public foundation did not act as a taxable person when ordered the cleaning of premises used for the university education (7.6% of the total surface area of the building).
The tax authority concluded that U-GmbH carried out the cleaning of educational premises ‘for purposes other than that of the business’ and that gave rise, in favour of the public foundation, to a ‘supply of services free of charge, treated as a supply of services for consideration’. On this ground, the tax authority treated the 7,6% of the total consideration net of the supplier’s margin as a taxable amount and established a VAT debt. The plaintiff initiated an administrative court procedure during which the Federal Fiscal Court referred the case to the ECJ for a preliminary ruling. The ECJ has confirmed that the transactions among the members of the same VAT group are not subject to VAT, regardless of whether the recipient of the services would be entitled to deduct the input VAT. Nor it has relevance whether the recipient of the services is acting as a taxable person or not because the VAT group, as a whole, constitutes a taxable person for its external transactions.
