On 8 May 2014, the Advocate General (AG) of the Court of Justice of the European Union (CJEU) issued an opinion in the case of Skandia America Corporation USA, Sweden branch (C-7/13).

The questions referred to the CJEU by the Swedish court related to supplies of externally purchased services from the main establishment of a company in a third (non-EU) state to its branch in an EU member state, with allocation of costs for a purchase by the branch, and whether these constitute taxable transactions for VAT purposes, if the branch belongs to a VAT group in the member state.  If so, the Swedish Court also refereed a question as to whether the main establishment in the third country as a taxable person not established in the member state, as a result of which the purchaser should be taxed on the transaction.

The Advocate General’s opinion is that as the branch is not independent of the main establishment, the overseas entity becomes a taxpayer in the EU member state as a result of the activities of its local branch. The transactions between the branch and the main establishment are not however taxable transactions for VAT purposes.

This opinion is relevant to financial enterprises and to partly exempt or other organizations where VAT treatment of intragroup transactions is significant. It should however be noted that the CJEU is not bound by the opinion of the AG when it considers its final decision.