Hvad er konsekvenserne af EU-domstolens afgørelse i Skandia-sagen, C-7/13?

Hsu Sabina & Saballo Lloyd

Student thesis: Master thesis


This master’s thesis provides an in-depth analysis of the recent CJEU ruling in the case of Skandia America Corporation, C-7/13. The CJEU stated in Skandia that a transaction from a head office located outside the EU to its branch in Sweden would constitute a taxable transaction, if the branch belongs to a national VAT group in Sweden. The ruling is a clear modification of the principles from the CJEU’s ruling in FCE Bank, case C-210/04, where it was determined that a supply between a head office and its foreign branch cannot constitute a supply subject to VAT, since the branch is part of its head office and why they must be viewed as a single taxable person together. The CJEU based its ruling on the economic reality, which revealed that the branch was dependent on its head office in terms of its economic activity, meaning that there could not be a legal relationship of reciprocal performance between them. There is no clear definitions within the VAT Directive in terms of how cross-border establishments should be treated for VAT purposes. This has resulted in a reliance on case law. Whilst the question was addressed and answered in the case of FCE Bank, it has and does not however provide certainty for cross-border establishments as to predicting their VAT treatment. For example, the CJEU’s ruling in DFDS, case C-260/95, and Le Crédit Lyonnais, case C-388/11, are likewise cases that posed questions as to how to view and treat companies with cross-border establishments for VAT purposes under EU VAT law. In the case of DFDS, the CJEU applied the same arguments for its judgement as in the FCE Bank, that is, the VAT treatment of interlinked entities must depend on the economic reality. However, in the case of Le Crédit Lyonnais, which concerned a head office’s right to include turnover from its foreign branches in the calculation of its pro rata deduction rate, the CJEU stated that the principle from the FCE Bank was not applicable. Essentially, this meant that in terms of the right to deduction a head office and its foreign branches would not be treated as a single taxable person under EU VAT law. This contradicts with the FCE Bank principle. In regards to the main case in this thesis, that is Skandia, the questions deriving from the case is whether a head office and its branch can continue to be treated as a single taxable person in a situation where the branch belongs to a VAT group, or whether the two entities then must be treated as to separate taxable persons due to branch being part of a VAT group. Article 11 of the VAT Directive states that member states are allowed to treat related legal entities, who are established in their territory, as a single taxable person for VAT purposes, that is, a VAT group. Amongst the most material effects of using this scheme, is that transactions between members of the group will be considered as falling outside the scope of VAT. This means that internal transactions are not charged VAT. Therefore, VAT grouping is particularly beneficial for companies who only have a partial right to deduction as the amount of irrecoverable input tax can be reduced through VAT grouping. The disregard of VAT within a group is in reality not very different from the disregard of VAT for transactions between a head office and its branch (FCE Bank). The answer to the questions raised in the case of Skandia is very significant, as Skandia is a part-insurance and part-financial company meaning that the company perform VAT exempt activities and as a consequence, they are only entitled to a limited right of deduction of input VAT. If claiming, as Skandia did, that the FCE Bank principle should continue to apply when the Swedish VAT group only included the branch would in reality lead to a situation where supplies between the American head office and its Swedish branch are not liable to VAT, while the supplies between the branch and other members of the VAT group would not be liable either but this time under Article 11 of the VAT Directive. As the General Advocate, Wathelet, stated “this would produce a result that was not desired by the EU legislature, namely that the supplies of services in question would not be taxable” (paragraph 76). The CJEU was likewise of the view that this should not be possible under EU VAT law. However, the CJEU’s reasoning in its ruling was brief and short, and it remains unclear what articles or legal arguments were truly behind the outcome of the case.

EducationsMSc in Commercial Law, (Graduate Programme) Final Thesis
Publication date2015
Number of pages117