The ECJ ruled Finnish regulations that allow VAT groups in the financial and insurance sector are not against the principle of neutrality.
The judgement reinforces a decision in a similar case brought by the Commission against Sweden and Finland. The ECJ and Advocate General found Article 11 of the VAT Directive does not provide member states the ability to impose other conditions on economic operators to form a VAT group, such as carrying out a certain type of activity or being part of a particular sector of activity.
“The Kingdom of Sweden however stated that it decided to restrict the possibility of forming a VAT group to those undertakings which are placed, directly or indirectly, under the supervision of the Finance Inspectorate and which are therefore covered by a public monitoring system in order to prevent tax evasion and avoidance,” said Meeri Tauriainen of Hannes Snellman.
The ECJ found the Commission failed to show convincingly that, in the light of the need to combat tax evasion and avoidance, this measure is not well founded.
“As a consequence of this the ECJ decided that the restriction of the application of the scheme provided for in Article 11 of the VAT Directive to undertakings in the financial and insurance sectors were contrary to European Union law,” Tauriainen said.
In this latest case, the Commission argued the rules are against the principle of equal treatment. However the ECJ did not address this because the Commission did not include this in their preliminary complaint.
This means it is still unclear whether EU member states can limit the scope of the grouping rules without a specific qualifying rule under the VAT Directive.
