Source: https://meijburg.com/news/advocate-general-at-cjeu-issues-opinion-on-vat-exemption-for-cost-sharing-groups-infringement-proceedings-against-germany
Timestamp: 2019-04-23 10:39:14+00:00

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The European Commission initiated infringement proceedings against Germany in 2009. These proceedings concerned the restriction in German national VAT legislation limiting the VAT exemption for cost-sharing groups to health professions. According to the European Commission, this sector limitation is not in line with the EU VAT Directive.
The VAT exemption for cost-sharing groups is limited to groups that perform VAT‑exempt ‘public interest’ activities. This would 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.
At present, three other cases concerning the application of the VAT exemption for cost‑sharing groups are pending before the CJEU. On March 1, 2017, the Opinions issued by AG Kokott in the DNB Banka (no. C-326/15) and Aviva (no. C-605/15) cases were published. On May 4, 2017, the CJEU will render judgment in the infringement proceedings initiated by the European Commission against Luxembourg (no. C-274/15) concerning the VAT exemption for cost-sharing groups.
The Opinion issued by AG Wathelet addresses Germany’s arguments for limiting the VAT exemption for cost-sharing groups to health professions in German national VAT legislation.
the creation, text and place of the VAT exemption for cost-sharing groups in the EU VAT Directive. In this respect, the AG referred to the CJEU judgment in the Taksatorringen case (no. C-8/01), which dealt with the VAT exemption for cost-sharing groups in the insurance sector.
The Opinion of AG Wathelet differs from the Opinions issued by AG Kokott in the DNB Banka (no. C-326/15) and Aviva (no. C-605/15) cases. AG Kokott had concluded that the VAT exemption for cost-sharing groups cannot be applied to the financial and insurance markets.
The AG advised the CJEU that the restriction in German national VAT legislation limiting the VAT exemption for cost-sharing groups to a certain sector cannot be justified by the requirement that the VAT exemption for cost-sharing groups must not give rise to a distortion of competition. Under established case law of the CJEU, an EU Member State is not allowed to limit the scope of the VAT exemption for cost-sharing groups by way of general measures. Any distortion of competition arising from the VAT exemption for cost-sharing groups must be examined on a case-by-case basis.
In her Opinion in the Aviva case (no. C-605/15) AG Kokott took the position that the non-competition condition must be interpreted ‘very precisely’ and that each further elaboration of this requirement by an EU Member State increases the risk of infringement proceedings against this EU Member State.
The European Commission’s infringement proceedings against Germany are one of a number of cases concerning the VAT exemption for cost-sharing groups that are pending before the CJEU (there are currently four cases pending). The pending cases could have far-reaching implications for the application of the VAT exemption for cost-sharing groups. In our news alert on the Opinions issued by AG Kokott in the DNB Banka (no. C-326/15) and Aviva (no. C-605/15) cases we indicated that the VAT exemption for cost-sharing groups may no longer apply to the financial and insurance markets if the CJEU follows AG Kokott on this. If, however, the CJEU follows the Opinion of AG Wathelet in the infringement proceedings against Germany, then the VAT exemption for cost-sharing groups can continue to apply to the financial and insurance markets. The CJEU will thus have to take the final decision on this.
Furthermore, the pending cases could also have implications for the current exclusions under the Dutch VAT exemption for cost-sharing groups. In light of the conclusions reached by AG Kokott and AG Wathelet with regard to the non-competition condition, these exclusions may be too broad.
The tax advisors of Meijburg & Co’s Indirect Tax Financial Services Group would be pleased to help you identify how the abovementioned cases could impact your business and provide you with constructive advice about the opportunities these cases can offer you in the future. Feel free to contact one of them or your regular contact for more information.

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