VAT cannot be reclaimed on supplies from a European Union company to an
unincorporated branch in another EU country, the European Court of Justice has
Judges said that under the EU’s sixth VAT directive, such a wing of a company
‘should not be treated as a taxable person’.
The ruling comes in a dispute between Britain’s FCE Bank and the Italian
finance ministry and revenue agency. FCE was trying to reclaim VAT on supplies
it made to an unincorporated Italian department, called FCE IT.
This was challenged by the Italian government, which denied there had been
any kind of taxable supply by FCE to FCE IT. The court agreed, stressing that
the Italian wing was ‘not a legal entity distinct from the company of which it
forms part’. The case is an EU-wide precedent for similar cases that might
arise. An appeal could be launched, but only on points of law.
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