VAT group : VAT on services provided by head-office to fixed establishment / branch


The CJEU confirmed the application of the reverse-Skandia principle: a branch is a separate VAT taxable person from its head-office when the head-office is a member of a VAT group in another EU Member State (CJEU, C-812/19, 11 March 2021).

This approach was already applied in Belgium. However, some EU Member States were not recognizing reverse-Skandia. Therefore, it is recommendable to check the implications as some transaction may become VAT taxable.

In brief

Danske Bank’s head-office is member of a Danish VAT group. The head office charged IT costs to its Swedish branch. The question referred to the CJEU was whether these cross-border services are subject to VAT.

The CJEU concluded that services provided by a head office, member of a VAT group in one EU Member State, to its branch, not part of a VAT group and established in another EU Member State, fall within scope of VAT. As a result, the service is subject to the reverse charge in Sweden.

Comments and practical implications

  • Based on the Danske Bank case, it is now clear that services between a head-office and its branch (and vice versa) fall within the scope of VAT if one of the entities is member of a VAT group in a Member State.
  • In Belgium, this broad interpretation of the Skandia case is already applied.
  • However, countries like The Netherlands and Germany applied Skandia more restrictively. They may have to change their position further to the judgement of the CJEU.

This will affect the financial sector where VAT grouping is widely used. We recommend checking the incoming and outgoing flows of your VAT group to assess whether this may impact the VAT treatment and/or the calculation of the input VAT deduction pro rata. If a head-office branch transaction falls within scope of VAT, it should also be checked whether a specific VAT exemption applies.

We would be pleased to assist you in reviewing the impact of the case on your business and to consider the actions to be taken.

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