German regulation on VAT groups confirmed

The European Court of Justice is convinced that the German requirement that the controlling company is also liable for VAT complies with EU law.

The European Court of Justice (ECJ) has ruled on two questions referred by the Federal Fiscal Court and determined that the German regulations on VAT groups are compatible with EU law. In particular, it is permissible for the VAT Act to designate the parent company as the tax debtor. The applications for reimbursement of the VAT paid by the plaintiff tax group parent companies will therefore not be successful.

However, the ECJ has nevertheless given the legislator some homework to do, as it has once again pointed out that the German requirement of a relationship of superiority and subordination in the tax group does not comply with EU law. Instead, a fiscal unity between sister companies with close economic ties must also be possible. In this context, the ECJ has also determined that the financial integration of a controlled company is solely dependent on the controlling company holding a majority share. However, the controlling company does not have to have a majority of the votes.

Finally, the ECJ considers the German requirement, according to which each part of the VAT group receives its own VAT number and must submit its own recapitulative statement, to be inadmissible. According to EU law, the entire tax group can only have one tax number for VAT purposes.