Germany: VAT exemption for cost-sharing groups | KPMG | GLOBAL

Germany: VAT exemption for cost-sharing groups; CJEU Advocate General opinion

Germany: VAT exemption for cost-sharing groups

The Advocate General of the Court of Justice of the European Union (CJEU) issued an opinion in the European Commission’s infringement proceedings against Germany (C-616/15), concluding that the restriction in German value added tax (VAT) legislation limiting the VAT exemption for cost-sharing groups to a certain sector is not in line with the EU VAT Directive.

1000

Related content

Background

The EC brought infringement proceedings against Germany in 2009 about German national VAT legislation limiting the VAT exemption for cost-sharing groups to health professions. Sector limitation is not in line with the EU VAT Directive according to the EC. Germany refused the EC’s request to amend the limitation, arguing in 2011 that:

  • The VAT exemption for cost-sharing groups is limited to groups that perform VAT‑exempt “public interest” activities, which do not cover the VAT-exempt activities performed by insurers, banks and other financial service providers.
  • Application of the VAT exemption for cost-sharing groups must not give rise to a distortion of competition. Limiting this exemption to health professions prevents competition being distorted.

Advocate General opinion

The Advocate General responded that the VAT exemption for cost-sharing groups cannot be limited to groups that perform VAT-exempt public interest activities.

In addition, the Advocate General rejected Germany’s argument that the restriction in its German national VAT legislation limiting the VAT exemption for cost-sharing groups to a certain sector is justified by the requirement that the VAT exemption for cost-sharing groups must not give rise to a distortion of competition. Any distortion of competition arising from the VAT exemption for cost-sharing groups must be examined on a case-by-case basis.

KPMG observation

Three other EC infringement cases on the application of the VAT exemption for cost-sharing groups are pending before the CJEU. There is uncertainty as to whether the VAT exemption for cost-sharing groups will continue to apply to financial and insurance markets. The pending cases may also have implications for current exclusions under the Dutch VAT exemption for cost-sharing groups. 

 

Read an April 2017 report prepared by the KPMG member firm in the Netherlands

The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.

Connect with us

 

Request for proposal

 

Submit