Opinion of the Advocate General — ECLI:EU:C:2022:11
Date: 2022-01-13
Language of the case: German
Subject matter: Taxation;Value added tax
Procedure: Reference for a preliminary ruling
Origin: Germany

Summary C-141/20 — 1 
Case C-141/20 
Summary of the request for a preliminary ruling pursuant to Article 98(1) of 
the Rules of Procedure of the Court of Justice 
Date lodged: 
23 March 2020 
Referring court: 
Bundesfinanzhof (Germany) 
Date of the decision to refer: 
11 December 2019 
Defendant and appellant in the appeal on a point of law: 
Finanzamt Kiel 
Applicant and respondent in the appeal on a point of law: 
Norddeutsche Gesellschaft für Diakonie mbH 
  
Subject matter of the main proceedings 
Turnover tax — Directive 77/388 — Power of a Member State to derogate from 
the legal consequence provided for in the second subparagraph of Article 4(4) of 
Directive 77/388 — Possibility for an individual to invoke the lack of conformity 
of the national legal consequence with EU law — Standard to be applied when 
assessing the necessity of the national derogation — Power of the Member States 
to base such a derogation on Article 4(1) or the first subparagraph of Article 4(4) 
of Directive 77/388 
Subject matter and legal basis of the reference 
Interpretation of EU law, Article 267 TFEU 
Questions referred 
1. Is the second subparagraph of Article 4(4) in conjunction with 
Article 21(1)(a) and Article 21(3) of Sixth Council Directive 77/388/EEC of 
EN 
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17 May 1977 on the harmonization of the laws of the Member States 
relating to turnover taxes (Directive 77/388/EEC) to be interpreted as 
permitting a Member State to designate, instead of the VAT group 
(‘Organkreis’, group treated as a single entity for tax purposes), a member of 
the VAT group (‘Organträger’, controlling company) as the taxable person? 
2. If question 1 is answered in the negative: Can the second subparagraph of 
Article 4(4) in conjunction with Article 21(1)(a) and Article 21(3) of 
Directive 77/388/EEC be invoked in this regard? 
3. Must a strict or lenient standard be applied in the assessment to be carried 
out in accordance with paragraph 46 of the Larentia + Minerva judgment of 
the Court of Justice of 16 July 2015, C-108/14 and C-109/14 
(EU:C:2015:496, paragraph 44 and 45), as to whether the requirement of 
financial integration contained in the first sentence of point 2 of 
Paragraph 2(2) of the Umsatzsteuergesetz (Law on turnover tax) constitutes 
a permissible measure which is necessary and appropriate for attaining the 
objectives seeking to prevent abusive practices or behaviour or to combat 
tax evasion or tax avoidance? 
4. Are Article 4(1) and the first subparagraph of Article 4(4) of Directive 
77/388/EEC to be interpreted as permitting a Member State to regard a 
person as not being independent within the meaning of Article 4(1) of 
Directive 77/388/EEC if that person is integrated into the undertaking of 
another undertaking (‘Organträger’, controlling company) in financial, 
economic and organisational terms in such a way that the controlling 
company is able to impose its will on the person and thus prevent the person 
from forming his own will, which diverges from that of the controlling 
company? 
Provisions of EU law cited 
Second Council Directive 67/228/EEC of 11 April 1967 on the harmonisation of 
legislation of Member States concerning turnover taxes — Structure and 
procedures for application of the common system of value added tax, in particular 
Annex A, item 2 
Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonization of the 
laws of the Member States relating to turnover taxes — Common system of value 
added tax: uniform basis of assessment, in particular Articles 14 and 21 
Provisions of national law cited 
Umsatzsteuergesetz (Law on turnover tax, ‘UStG’), in particular Paragraph 2 
FINANZAMT KIEL 
 
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Brief summary of the facts and procedure 
1 The parties are in dispute as to whether a tax-group arrangement for turnover-tax 
purposes existed between A as the controlling company and the applicant as the 
controlled company in 2005 (year at issue). 
2 The applicant is a Gesellschaft mit beschränkter Haftung (limited liability 
company). Its shareholders are A (51%) and C e. V. (49%). A is a public-law 
body. C e. V. is a registered association. The applicant’s sole manager in the year 
at issue was E, who, at the same time, was also the sole manager of A and 
executive board member of C e. V. 
3 In the course of an external audit of the applicant, the defendant came to the 
conclusion that a tax-group arrangement did not exist between the applicant and A 
in the year at issue, as the applicant was not financially integrated into A’s 
undertaking. Although, with 51%, A held a majority shareholding in the 
applicant’s share capital, it did not hold a majority of the voting rights, owing to 
the provisions of the articles of association, and was therefore not able to impose 
decisions on the applicant. 
4 The Finanzgericht (Finance Court) upheld the action subsequently brought. The 
appeal on a point of law brought before the referring court by the defendant is 
directed against that decision. 
Brief summary of the basis for the reference 
Assessment on the basis of national law 
5 The appeal on a point of law would be well founded under national law, since 
financial integration in the form of a majority of the voting rights, as required for a 
tax-group arrangement under, inter alia, the first sentence of point 2 of 
Paragraph 2(2) UStG, does not exist. 
The questions referred 
Questions referred in relation to the second subparagraph of Article 4(4) of 
Directive 77/388 
6 In point 2 of the operative part of the Larentia + Minerva judgment 
(EU:C:2015:496), the Court of Justice ruled, inter alia, that the second 
subparagraph of Article 4(4) of Directive 77/388 must be interpreted as precluding 
national legislation which reserves the right to form a value added tax group, as 
provided for in those provisions, solely to entities linked to the controlling 
company of that group in a relationship of subordination, except where that 
requirement constitutes a measure which is appropriate and necessary in order to 
achieve the objectives seeking to prevent abusive practices or behaviour or to 
SUMMARY OF THE REQUEST FOR A PRELIMINARY RULING — CASE C-141/20 
 
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combat tax evasion or tax avoidance, which it is for the referring court to 
determine. 
7 The referring court takes the view that are doubts as to whether a Member State 
can derogate from the legal consequence prescribed in the second subparagraph of 
Article 4(4) of Directive 77/388 and, if it can, as to the conditions under which it 
can do so. This gives rise to the first question referred. 
8 Based on the Court of Justice’s statements in paragraphs 41 and 42 of the Larentia 
+ Minerva judgment (EU:C:2015:496), a derogating designation of a taxable 
person other than the VAT group, in derogation from the second subparagraph of 
Article 4(4) of Directive 77/388, could have been permissible in the year at issue 
in order to prevent abusive practices or behaviour or to combat tax evasion or tax 
avoidance. 
9 The Skandia America (USA) judgment of 17 September 2014, C-7/13 
(EU:C:2014:2225), according to which the VAT group is liable for the VAT if 
such a group exists, and paragraph 20 of the Ampliscientifica and Amplifin 
judgment of 22 May 2008, C-162/07 (EU:C:2008:301), according to which the 
second subparagraph of Article 4(4) of Directive 77/388 necessarily requires the 
national implementing legislation to provide that the taxable person is a single 
taxable person, could militate against that possibility. 
10 In addition, Article 21(1)(a) of Directive 77/388 could also militate against the 
view that Member States have the power to designate, instead of the taxable 
person designated under EU law, a different person liable to pay tax. Such power 
cannot be inferred from that provision. Article 21(3) of Directive 77/388 merely 
allows Member States to provide that other persons are to be held jointly and 
severally liable. 
11 It is also not clear how regarding a member of the VAT group instead of the VAT 
group itself as the taxable person could serve to prevent abusive practices or 
behaviour or to combat tax evasion or tax avoidance. It is therefore doubtful 
whether that justifying circumstance allows for a derogation in the first place. 
12 If, based on the Court of Justice’s answer to the first question referred, it is not 
permissible under EU law for a Member State to designate a member of the VAT 
group instead of the VAT group itself as a taxable person, the referring court takes 
the view that it is also doubtful whether an individual may invoke the lack of 
conformity of the national legal consequence with EU law. This gives rise to the 
second question referred. 
13 An argument against the existence of such a right is the fact that the Court of 
Justice ruled, in point 3 of the operative part of the Larentia + Minerva judgment 
(EU:C:2015:496), that Article 4(4) of Directive 77/388 may not be considered to 
have direct effect allowing taxable persons to claim the benefit thereof against 
their Member State in the event that that State’s legislation is not compatible with 
that provision and cannot be interpreted in a way compatible with it. 
FINANZAMT KIEL 
 
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14 However, paragraph 20 of the Ampliscientifica and Amplifin judgment 
(EU:C:2008:301) could lead to a different conclusion (see above, paragraph 9). 
15 In addition, individuals could potentially invoke Article 21(1)(a) of Directive 
77/388, since the designation of a different taxable person results in the 
designation of a different person liable to pay tax. 
16 Furthermore, in the context of the assessment of whether the national requirement 
of financial integration is necessary within the meaning of paragraphs 45 and 46 
of the Larentia + Minerva judgment (EU:C:2015:496), there are also doubts from 
an EU-law perspective as to the strictness of the standard to be applied when 
assessing the necessity of the national derogation. This forms the subject matter of 
the third question referred. 
17 Under national law, the controlling company can enforce its rights in connection 
with the obligation to pay tax on behalf of the controlled company, namely by 
bringing an action against that company. Therefore, considered from a narrow 
perspective, the national rule might not be necessary. 
18 The referring court recognises that, in paragraph 46 of its Larentia + Minerva 
judgment (EU:C:2015:496), the Court of Justice imposed the task of carrying out 
the required assessment on the national courts. However, the referring court will 
only be able to carry out the assessment incumbent on it once it has been decided 
what standard is to be applied in the assessment of necessity. 
19 In the Commission v Sweden judgment of 25 April 2013, C-480/10 
(EU:C:2013:263), the Court of Justice held that the Commission had failed to 
show convincingly that, in the light of the need to combat tax evasion and 
avoidance, that measure taken by the Kingdom of Sweden was not well founded. 
This could militate in favour of a very broad understanding of the Member States’ 
power of derogation. 
20 In other respects, however, in the context of the principle of proportionality when 
reviewing measures of the EU or the Member States in established case-law, the 
Court of Justice has proceeded on the basis of whether a measure goes beyond 
what is (strictly) necessary in order to achieve the objective pursued (see, for 
example, the judgments Di Maura of 23 November 2017, C-246/16, 
EU:C:2017:887, paragraph 25; Avon Cosmetics of 14 December 2017, C-305/16, 
EU:C:2017:970, paragraph 44; Menci of 20 March 2018, C-524/15, 
EU:C:2018:197, paragraph 46 et seq. and 52; EN.SA. of 8 May 2019, C-712/17, 
EU:C:2019:374, paragraph 33; A-PACK CZ of 8 May 2019, C-127/18, 
EU:C:2019:377, paragraphs 26 and 27). This could militate in favour of somewhat 
stricter, or even very strict, requirements on necessity. 
21 However, consideration may have to be given to the fact that the second 
subparagraph of Article 4(4) of Directive 77/388 is an exception to the principle 
of Article 4(1) of Directive 77/388. Counter-exceptions which, by way of 
derogation from the exception, restore the general rule must be interpreted broadly 
SUMMARY OF THE REQUEST FOR A PRELIMINARY RULING — CASE C-141/20 
 
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rather than narrowly, including in the case of Article 4 of Directive 77/388 (see 
judgments Isle of Wight Council and Others of 16 September 2008, C-288/07, 
EU:C:2008:505, paragraph 60; SALIX Grundstücks-Vermietungsgesellschaft of 
4 June 2009, C-102/08, EU:C:2009:345, paragraphs 67 and 68), which, in turn, 
militates in favour of a more lenient assessment of necessity. 
22 Furthermore, clarification is required as to what extent the principle of legal 
certainty or the purpose of administrative simplification may be taken into account 
in the assessment. The Court of Justice did not refer to them in paragraph 46 of its 
judgment in Larentia + Minerva (EU:C:2015:496); in addition, the tax-group 
arrangement under national law does not serve the purpose of administrative 
simplification, but rather the purpose of avoiding unnecessary administrative work 
in the economy. 
23 The referring court is also inclined to take the view that the principle of legal 
certainty and the purpose of the tax-group arrangement are essentially unable to 
justify the imposition of substantive requirements on integration. If, for example, 
financial integration did not require a majority of voting rights, but rather a 
majority of shares were sufficient, this characteristic could be ascertained with at 
least the same degree of legal certainty as in the case of a majority of voting 
rights. Administrative simplification or the avoidance of unnecessary 
administrative work in the economy would occur in the same way. 
Question referred in relation to Article 4(1) and the first subparagraph of 
Article 4(4) of Directive 77/388 
24 The referring court considers it necessary to refer a further question on 
Article 4(1) and the first subparagraph of Article 4(4) of Directive 77/388, since 
the national approach for establishing a tax-group arrangement is conceptually, 
systematically and historically based on the characteristic of independence and 
could therefore also be justified as a permissible interpretation or classification by 
virtue of Article 4(1) or the first subparagraph of Article 4(4) of Directive 77/388. 
This gives rise to the fourth question referred, which is asked entirely 
independently of the first to third questions referred. 
25 The German tax-group arrangement was originally based on the assumption that 
the controlled company had ‘no will of its own’. The referring court takes the 
view that clear parallels can be drawn between the original justification based on 
the lack of independence in cases where an entity does not have a ‘will of its own’ 
and the considerations on which the Court of Justice based its assessment of 
independence in the Gmina Wrocław judgment of 29 September 2015, C-276/14 
(EU:C:2015:635, paragraph 30 et seq.), and Saudacor judgment of 29 October 
2015, C-174/14 (EU:C:2015:733, paragraphs 60, 63 and 67). In those cases, the 
Court of Justice based its considerations on an existing relationship of 
subordination (‘employer-employee relationship’) (see Gmina Wrocław judgment, 
EU:C:2015:635, paragraphs 33, 34 and 36) and on an organisational link 
(Saudacor judgment, EU:C:2015:733, paragraph 67). 
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26 The assessment of whether a natural person is independent within the meaning of 
Article 4(1) and the first subparagraph of Article 4(4) of Directive 77/388 also 
takes account of ‘subordination’ (see judgments Heerma of 27 January 2000, 
C-23/98, EU:C:2000:46, paragraph 18, van der Steen of 18 October 2007, 
C-355/06, EU:C:2007:615, paragraph 18 et seq., and IO of 13 June 2019, 
C-420/18, EU:C:2019:490, paragraphs 32, 38 and 39). 
27 Taking account of the Gmina Wrocław judgment (EU:C:2015:635, paragraph 35), 
the referring court takes the view that it cannot be ruled out that, although the 
justification under EU law for the (very strict) subordination criteria imposed by 
Germany for the existence of a tax-group arrangement cannot be found in the 
second subparagraph of Article 4(4) of Directive 77/388, it can be found in 
Article 4(1) and the first subparagraph of Article 4(4) of that directive. It is 
possible that Article 4(1) or the first subparagraph of Article 4(4) of the directive 
allows Germany to regard the controlled company as not being independent 
within the meaning of Article 4(1) of the Directive due to its subordination to the 
controlling company — as provided for in point 2 of Paragraph 2(2) UStG. 
28 In this respect, it is doubtful whether the Member States may determine the cases 
in which it can typically be assumed that a person has ‘no will of his own’ and is 
therefore not independent within the meaning of Article 4(1) of Directive 77/388. 
This is the approach taken in the first sentence of point 2 of Paragraph 2(2) of the 
current version of the German UStG. 
29 The Court of Justice has acknowledged the legitimacy of the objective consisting 
in the laying down by a legislature of general rules which can be easily applied by 
economic operators and are easily verified by the competent national authorities, 
even though those rules are necessarily approximate in nature (see judgments 
Sopora of 24 February 2015, C-512/13, EU:C:2015:108, paragraphs 35 and 36, 
and RPO of 7 March 2017, C-390/15, EU:C:2017:174, paragraphs 57, 58 and 60). 
Since the determination of the taxable person constitutes a rule liable to entail 
financial consequences, those concerned must know precisely the extent of the 
obligations imposed on them before concluding a transaction (see judgments 
Halifax and Others of 21 February 2006, C-255/02, EU:C:2006:121, 
paragraph 72, and Teleos and Others of 27 September 2007, C-409/04, 
EU:C:2007:548, paragraph 48). 
30 Germany’s classification of a lack of independence could therefore be permissible 
under EU law. The reason for this is that if the German courts were to carry out 
the assessment — required under Article 4(1) of Directive 77/388 — of whether a 
legal person has no will of its own and is therefore not independent in the overall 
context of the situation, without basing that assessment on statutorily defined 
criteria, this could be capable of leaving the persons concerned in uncertainty over 
their tax obligations. 
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31 The referring court recognises that the characteristic of independence in 
Article 4(1) of Directive 77/388 is a concept of EU law, which raises the question 
of whether the national legislature has a possible power of classification. 
32 A systematic interpretation could militate in favour of this, since the first 
subparagraph of Article 4(4) of Directive 77/388 also refers to a relationship of 
subordination (‘relationship of employer and employee’), whereby such a 
relationship indicates a lack of independence. This could express a general legal 
concept. 
33 A historical interpretation could also militate in favour of this: it could be inferred 
from item 2 of Annex A of Directive 67/228 that the tax-group arrangement was a 
case of a lack of independence. Annex A to Directive 67/228 appears to have 
served, inter alia, to legitimise Germany’s tax-group-arrangement scheme under 
EU law. This could also still be of significance today. 
34 Finally, the second subparagraph of Article 4(4) of Directive 77/388 does not 
militate against such an interpretation; in particular, the provision does not lose its 
purpose: there are significant differences between the joint taxation of the 
members of a VAT group as provided for in that provision and the German tax-
group arrangement, in terms of both the criteria and the legal consequences.