In this article, which is derived from his presentation at the Forum of the Confédération Fiscale Européenne (CFE) on 23 April 2009, the author argues that the territorial limitation of VAT grouping under EU law violates the principle of free establishment and prevents multinationals with a restricted right to recover input VAT from enjoying the advantages of shared service centres and other centralized functions. According to the author, it is possible to develop a VAT grouping system that would avoid distortions of competition.