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VAT focus: The CJEU decision in Skandia

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The CJEU judgment in Skandia significantly changes the accepted VAT liability of cross-border recharges between an overseas company and its branch, where that branch is in a VAT group. The CJEU has held that where a supply is made intra-entity, in circumstances where the recipient is part of a VAT group, it is necessary to depart from the well-known principle in FCE Bank that intra-entity transactions do not give rise to a supply. The disregard of VAT for transactions between head office and branch has been widely used in VAT planning arrangements that avoid VAT on imported IT services and to avoid inefficiencies in global service centre structures.

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