The Interaction between Head Office, Branch and VAT Grouping: New Challenges Ahead for the European Union

In this article, the authors discuss how the boundaries of the VAT taxable status are set for a head office and a branch in a cross-border situation, and if a branch could qualify as an independent taxable person for VAT purposes, despite the fact that it forms a legal entity with the head office. The authors also consider whether the relationship between a head office and branch changes if one of them is part of a VAT group, taking into account the ECJ decision in Skandia, and other recent developments surrounding this judgment. At the end, the VAT treatment of international cost recharges between a head office and branch is discussed taking into account the OECD’s International VAT/GST Guidelines.