A meeting of the European Commission’s VAT Expert Group (EG) took place on 5 February in Brussels. Insurance Europe (who is an observer in this group) was represented by Mr Patrick Stapleton, who kindly provided the summary below:
The VAT EG meeting focussed in particular on the issue of VAT grouping. The discussion revolved around a paper that was circulated before the meeting
The focus of the paper was the meaning of the three links required for Grouping namely financial, economic and organisational links. Some Member States are applying these links very narrowly or focusing on one (financial links) above the others.
- The paper advocates a holistic approach when looking at the three links. The three should be applied in a flexible way, looking at the economic and organisational reality and taking into account the specific circumstances of the entities looking to be grouped.
- The linking factors can exist in different forms depending on the circumstances and reflecting the economic reality. Therefore, not all links have to be fulfilled to the same extent and they don’t need to have the same weight. The overall picture of the economic activity and the economic reality is decisive. Sometimes there won’t be strong financial links but there will be strong organisational links.
- Applying the conditions on a stand-alone basis and in a too formal way by taking a form over substance approach would mean that certain persons that are economic units could not be grouped.
- Therefore, the EG recommends a holistic approach as the best practice. This approach is already applied in 10 out of the 16 Member States that already have VAT grouping.
- There was no material discussion on cost sharing groups during the VAT EG meeting.
Next steps
The EG would like to finalise this paper by the end of February and has asked for comments to be submitted as soon as possible. The proposal will then be sent to the Commission for review.