(February 26, 2015) 

On February 26, 2015 the European Commission issued a press release announcing that it has decided to refer Germany to the Court of Justice of the European Union (CJEU) to ensure that the German VAT legislation on exemptions for sharing costs of services complies with EU law.

On April 6, 2011 the European Commission issued a press release announcing that it had formally requested Germany to amend its value added tax (VAT) legislation so as to extend the scope of the exemption from VAT for services supplied to their members by independent groups of persons with no right to deduct VAT. (Click here for the full text of the press release as issued by the European Commission on April 6, 2011)

Cost sharing groups are associations of taxpayers who come together to purchase services from third parties. According to the European Commission the VAT Directive exempts from VAT services that cost sharing groups can supply to their members under the following conditions: the members' activities should be exempted from VAT, the shared services should be directly necessary to the members' activities, the group should claim exact reimbursement of each member's share of the joint expenses and finally, such exemption should not cause distortions of competition. The European Commission furthermore is of the opinion that this rule does not limit the exemption to any sector.

In their press release of February 26, 2015 the European Commission states that the German VAT legislation exempts only groups from the health and medical sector. According to the European Commission groups from other sectors have to pay VAT on shared services. The European Commission is of the opinion that by restricting the VAT exemptions to services in the medical and health care sector, the German VAT legislation conflicts with EU law.

On April 6, 2011 the European Commission sent a request taking the form of a reasoned opinion to Germany. Germany was requested to extend the scope of the domestic VAT provisions for failure to comply with the VAT Directive. The European Commission statest hat as the national legislation was not amended, the case is now being referred to the Court of Justice of the European Union.

Click here to be forwarded to the press release as issued by the European Commission on February 26, 2015.

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