Case C-85/11

European Commission

v

Ireland

‛Failure of a Member State to fulfil obligations — Taxation — Directive 2006/112/EC — Articles 9 and 11 — National legislation permitting the inclusion of non-taxable persons in a group of persons who may be regarded as a single taxable person for VAT purposes’

Summary — Judgment of the Court (Grand Chamber), 9 April 2013

Harmonisation of tax legislation — Common system of value added tax — Taxable persons — Meaning — Option for Member States to regard persons who are closely linked as a single taxable person — National legislation permitting the inclusion of non-taxable persons in a group of persons who may be regarded as a single taxable person — Failure to fulfil obligations — None

(Council Directive 2006/112, Art. 11)

A Member State which permits the inclusion of non-taxable persons in a group of persons who may be regarded as a single taxable person for value added tax purposes has not failed to fulfil its obligations under Article 11 of Directive 2006/112 on the common system of value added tax.

It cannot be inferred from the words ‘as a single taxable person’ that Article 11 of the Directive seeks solely to permit a number of taxable persons to be dealt with as a single entity, as those words relate, not to a condition for the application of that article, but to its outcome, which is that a number of persons are regarded as a single taxable person. In addition, the wording of that article does not make it possible to take the view that it represents an exception to the general rule that each taxable person must be treated as a separate entity, with the result that that article is to be interpreted restrictively, or that the concept of grouping implies that all of the persons concerned belong to the same category, as the word ‘grouping’ does not appear in that article.

Furthermore, as regards the objectives pursued by Article 11 of the Directive, the EU legislature intended, either in the interests of simplifying administration or with a view to combating abuses such as, for example, the splitting-up of one undertaking among several taxable persons so that each might benefit from a special scheme, to ensure that Member States would not be obliged to treat as taxable persons those whose ‘independence’ is purely a legal technicality. It is not evident that the possibility for Member States to regard as a single taxable person a group of persons including one or more persons who may not individually have the status of a taxable person runs counter to those objectives. It is, on the contrary, conceivable that the presence, within a VAT group, of such persons contributes to administrative simplification both for the group and for the tax authorities and makes it possible to avoid certain abuses, and that that presence may even be indispensable to that end if it alone establishes the close financial, economic and organisational links which must exist between the persons constituting that group in order for it to be regarded as a single taxable person.

(see paras 40, 47, 48)

Case C-85/11

European Commission

v

Ireland

‛Failure of a Member State to fulfil obligations — Taxation — Directive 2006/112/EC — Articles 9 and 11 — National legislation permitting the inclusion of non-taxable persons in a group of persons who may be regarded as a single taxable person for VAT purposes’

Summary — Judgment of the Court (Grand Chamber), 9 April 2013

Harmonisation of tax legislation — Common system of value added tax — Taxable persons — Meaning — Option for Member States to regard persons who are closely linked as a single taxable person — National legislation permitting the inclusion of non-taxable persons in a group of persons who may be regarded as a single taxable person — Failure to fulfil obligations — None

(Council Directive 2006/112, Art. 11)

A Member State which permits the inclusion of non-taxable persons in a group of persons who may be regarded as a single taxable person for value added tax purposes has not failed to fulfil its obligations under Article 11 of Directive 2006/112 on the common system of value added tax.

It cannot be inferred from the words ‘as a single taxable person’ that Article 11 of the Directive seeks solely to permit a number of taxable persons to be dealt with as a single entity, as those words relate, not to a condition for the application of that article, but to its outcome, which is that a number of persons are regarded as a single taxable person. In addition, the wording of that article does not make it possible to take the view that it represents an exception to the general rule that each taxable person must be treated as a separate entity, with the result that that article is to be interpreted restrictively, or that the concept of grouping implies that all of the persons concerned belong to the same category, as the word ‘grouping’ does not appear in that article.

Furthermore, as regards the objectives pursued by Article 11 of the Directive, the EU legislature intended, either in the interests of simplifying administration or with a view to combating abuses such as, for example, the splitting-up of one undertaking among several taxable persons so that each might benefit from a special scheme, to ensure that Member States would not be obliged to treat as taxable persons those whose ‘independence’ is purely a legal technicality. It is not evident that the possibility for Member States to regard as a single taxable person a group of persons including one or more persons who may not individually have the status of a taxable person runs counter to those objectives. It is, on the contrary, conceivable that the presence, within a VAT group, of such persons contributes to administrative simplification both for the group and for the tax authorities and makes it possible to avoid certain abuses, and that that presence may even be indispensable to that end if it alone establishes the close financial, economic and organisational links which must exist between the persons constituting that group in order for it to be regarded as a single taxable person.

(see paras 40, 47, 48)