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12 June 20232 minute read

UK VAT Group: VAT treatment of transactions between Italian and UK permanent establishments


After Brexit, supplies of services between an Italian and a UK fixed establishment of a German head-office are deemed to be outside the scope of VAT, in accordance with CJEU case C­210/04 (FCE Bank) even if the UK fixed establishment belongs to a UK VAT Group (i.e. the UK’s grouping rules apply to the whole entity not just the local establishment under “Skandia” ).

In accordance with EC Working Paper no. 1027/2021, Ruling no. 314/2023 of the Italian Tax Authorities overruled the authorities’ previous approach (i.e. Ruling no. 756/2021) by clarifying that, in case of services between two fixed establishments of the same company, the fact that one of the two entities belongs to a non-EU VAT Group (e.g. UK post Brexit) does not change their qualification as “single taxable persons” for VAT purposes.

Therefore, in such cases, CJEU FCE Bank principles (see, judgment C-210/04) - according to which no supply of services occurred between a headquarter and its branch – apply.

This is however not the case for services between a head office and its fixed establishment, where one of which belongs to an EU VAT group.

Indeed, as ruled by the CJEU in “Skandia” case (judgment C-7/13) and by Article 70-quinquies, par. 4-bis and ss. of the Italian VAT Decree, services between headquarter and fixed establishments, one of which belonging to an EU VAT Group, become subject to VAT.

However, this exception is limited to EU VAT Groups only (non-EU VAT Groups are excluded).

Key takeaway

Subject to their local grouping rules, multinational corporate groups with a UK (or non-EU) VAT Group in place may consider this exception to better arrange their intercompany supplies between Italian entities and their head office / branch since the Skandia decision will not apply.


Reference: Italian Tax Authority, Advance Ruling No. 314 of 8 May