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25 September 2014

European Court of Justice and VAT


A ruling from the CJEU holds that services between a group’s headquarters and other branches should be subject to VAT- which could substantially increase the tax bills of financial services firms.

This was a surprise ruling. The FT reports:

Banks and insurers in Europe are bracing for extra value added tax bills that could potentially run into billions of euros after an unexpected decision from the European Court of Justice.

The ruling on a dispute between Skandia America Corporation, a US arm of the insurer, and the Swedish tax authority means that services supplied between a group’s headquarters and its branches are set to be subject to VAT.

Stephen Morse, a tax partner at PwC, said many financial services companies operating in Europe would see their VAT bills soar. He said individual charges for the biggest banks and insurance firms could rise by tens of millions of euros. “The case significantly expands the VAT net for financial services firms. Banks and insurers are likely to be affected most,” he said.


FT (Subscription required.)



© Financial Times


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