Ref. Ares(2020)5179696 - 02/10/2020
EUROPEAN COMMISSION
DIRECTORATE-GENERAL
TAXATION AND CUSTOMS UNION
Indirect taxation and tax administration
VAT and other turnover taxes
TAXUD/2161/07/ADD1 - EN
Brussels, 24 January 2008
VALUE ADDED TAX COMMITTEE
(ARTICLE 398 OF DIRECTIVE 2006/112/EC)
WORKING PAPER NO 556 – ADDENDUM 1
CONSULTATION
PROVIDED FOR UNDER DIRECTIVE 2006/112/EC
ORIGIN:
Hungary
REFERENCE:
Article 11
SUBJECT: VAT
grouping
Commission européenne, B-1049 Bruxelles / Europese Commissie, B-1049 Brussel - Belgium. Telephone: (32-2) 299 11 11.
Office:
. Telephone: direct line (32-2)
. Fax: (32-2)
E-mail:
@ec.europa.eu
TAXUD/2161/07 ADD1 – Working paper No 556 – Addendum 1
VAT Committee - Consultation
1. CONSULTATION BY HUNGARY
The Hungarian authorities have informed the Commission that they wish to consult the
VAT Committee on the introduction into their national legislation of the VAT grouping
scheme, in accordance with Article
11, read in conjunction with Article
398 of
Directive 2006/112/EC (hereinafter the "VAT Directive"). The new national legislation
entered into force on 1 January 2008.
The relevant national legislation of the VAT grouping scheme (Section 8) is attached, see
Annex.
The Hungarian consultation is closely linked to the six consultations in working paper No
556 on VAT groupings from Belgium, Spain, Ireland, United Kingdom, Romania and the
Czech Republic, which was first discussed at the 82nd VAT Committee meeting. It is
prudent to discuss this consultation, despite its late receipt, in with those others.
Therefore, this working paper has been drawn up as an addendum to working paper No
556 and refers to this.
2. COMMISSION OPINION
The Commission has in working paper 556, section 2.1, proposed a general framework
for VAT grouping with the aim of adopting a guideline for implementing the VAT
grouping option. The Commission refers to its opinion in that section.
3. NATIONAL LEGISLATION ON VAT GROUPING
3.1 Description of Hungarian legislation
The essential elements of the Hungarian legislation are as follows:
(1)
It is optional to create and participate in a VAT group. A VAT group can be
created by taxable persons established in Hungary. Furthermore, to be a member of
a VAT group it is necessary for the taxable persons wishing to create a VAT group
to be closely bound. Two undertakings are considered to be closely bound in either
of the following two cases: (i) one undertaking directly or indirectly holds more
than 50% of the voting rights in the other undertaking, or (ii) a third undertaking
directly or indirectly holds more than 50% of the voting rights in both
undertakings. Undertakings are also closely bound if, instead of the voting rights,
one undertaking has the right either directly or indirectly to appoint or to call back
the majority of the members of the Board of Directors.
(2)
A taxable person may belong to only one VAT group. The transactions between
the members of the same VAT group are disregarded for VAT purposes.
(3)
The VAT group is created on the authorisation of the Tax Administration Office,
and is cancelled when the authorisation is withdrawn. The authorisation is
withdrawn at the request of any of the members of the VAT group, when the
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conditions for being a VAT group are no longer met, or when any member of the
VAT group does not fulfil the conditions of being a member of that VAT group.
(4)
It is possible to join an already existing VAT group, when the taxable person
fulfils the condition of being a member of that VAT group, and any member of the
VAT group may leave the group. Both the joining and leaving must be authorised
by the Tax Administration Office and it requires the agreement of all other
members of that group.
(5)
When joining a VAT group a member ceases to be an individual (separate) taxable
person for VAT purposes. They are regarded as having ceased trading and their
legal successor is the VAT group. The members of the VAT group are jointly and
severally liable for the VAT obligations of the other members which have arisen
before and during their membership in the VAT group.
(6)
The VAT group is regarded as a single taxable person. The rights and obligations
of the VAT group are exercised by a representative elected by its members.
Accordingly, the VAT group is regarded as a single taxable person, is identified
by a single tax number for VAT purposes, files its own monthly VAT returns
indicating the tax payable and deductible of the group.
The national legislation in question has no special provisions concerning the bankruptcy
of one of the members of the VAT group, but also in this case the other members are
jointly and severally liable for the VAT obligation of this member.
3.2 Commission opinion
The Commission does not have any particular remark concerning the Hungarian VAT
grouping, as outlined in the request, except for point 1.
Section 8, point 1.b) in the national law refers just to “related undertakings” and no
further explanations are offered in the Section. The request refers only to voting rights but
it seems not to include financial and economic links, which are part of the requirements
of a VAT group. Finally it is not clear whether the " third undertaking", mentioned in
point 1 (ii) in the request, is involved in the VAT group or not.
However, while the explanation made in the request appears to be in accord with the
general requirements of a VAT group, the Hungarian legislation (see Annex) is not in line
with the explanation given in the request. The Commission would like the Hungarian
delegation to clarify the following points of the legislation in order to dispel any doubt.
• Point 1) of the Hungarian legislation refers to "taxpayers" whereas the VAT group
should be constituted only of taxable persons.
• The meaning of the following sentence in point 2.b) is not clear: “
the economic activity
gives rise to a taxable person status where the related rights and obligations pertain
jointly to all the members participating in the VAT grouping”. On the one hand it
seems that some members of a VAT group could be non-taxable persons that
subsequently become taxable persons because of the activity of the group, on the other
hand it seems that only transactions simultaneously involving all the members could be
regarded as group transactions.
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• In point 3) permission of the tax authority is requested for a VAT group. However the
legislation suggests that this permission is always granted when the requirements are
fulfilled, without any further decision to be taken by the authority. The Commission
asks for a confirmation of its understanding.
• Point 3.a) concerns the appointment of a representative. The representative should
accept to act as such and in point 11.b) it is clarified that any refusal to further act as
such means the end of the VAT group. The Commission would like to know who could
act as a representative and the circumstances under which a representative can refuse
to act as such.
• Point 5) seems to refer to persons that, before being member of a VAT group, do not
have the status of taxable persons. The Commission asks the Hungarian delegation to
explain in more detail the meaning of this point as well as the reference to “legal
succession”.
• In several points there is a reference made to the role played by "the non-participating
taxable persons". This reference is not particularly clear. This seems to be a category of
taxable persons which are established in the territory and that could be entitled to join
the VAT group but who do not wish to do so for. These persons should be, however,
jointly liable for the VAT of the group and play a role in the group (initially at the
formation of the Group and at its end). As it is not clear whether this category of
taxable persons is inside or outside the VAT group or what the relationship is between
these taxable persons and the economic activity of the group, the Commission asks the
Hungarian delegation to provide more information regarding this point and the reasons
why it has been foreseen in the legislation.
• Additionally, the Commission recognizes that the national legislation in question has
no particular provisions concerning bankruptcy despite members of the group being
jointly and severally liable for the VAT obligation of any member.
• Finally, the Commission would like the Hungarian delegation to clarify whether
transactions to third parties by single members of the group acting as independent
persons are possible.4. Opinions of the delegations
4. OPINIONS OF THE DELEGATIONS
The delegations are asked to give their opinions on the above matters.
*
* *
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Annex
Reference number
HEAD OF UNIT
1515/ /2008.
EUROPEAN COMMISSION
Official in charge:
DIRECTORATE-GENERAL
TAXATION AND CUSTOMS UNION
„17 „ January 2008
Budapest Subject: Request for consultation the VAT
Committee in accordance with Article 11 of
Directive 2006/112/EC – VAT group
,
Based on Article 11 of Council Directive 2006/112/EC Hungary is consulting the VAT
Committee on VAT grouping rules.
According to Act on Value Added Tax Nr. CXXVII of 2007 it is possible as from 1st of
January 2008 to create a VAT group in Hungary. The relevant provisions for VAT
grouping are the following:
1. Creation of (and participation in) a VAT group is optional. A VAT group can be
created by taxable persons established in Hungary. Beside this, to be a member of
a VAT group it is necessary for the taxable persons wishing to create a VAT group
to be closely bound. Two undertakings are considered as closely bound in the
following two cases: (i) one undertaking directly or indirectly holds more than
50% of the voting rights in the other undertaking, or (ii) a third undertaking
directly or indirectly holds more than 50% of the voting rights in both
undertakings. Undertakings are also closely bound if instead of the voting rights
one undertaking has the right either directly or indirectly to appoint or to call back
the majority of the members of Board of Directors.
2. One taxable person may belong to only one VAT group. The transaction between
the members of the same VAT group are disregarded for VAT purposes.
3. The VAT group is created upon the authorization of the Tax Administration
Office, and is cancelled when the authorization is withdrawn. The Tax
Administration Office withdraws the authorization, when it is requested by any of
the members of the VAT group, when the conditions for creating a VAT group are
not fulfilled anymore or when any member of the VAT group does not fulfil the
conditions of being a member of the VAT group.
4. It is possible to join an already existing VAT group, when the taxable person
fulfils the condition of being a member of this VAT group, and any member of the
VAT group may leave the group. Both the joining and leaving must be authorized
by the Tax Administration Office and it requires the agreement of all other
members of that group.
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5. When joining a VAT group a member ceases to be an individual (separate) taxable
person for VAT purposes. He is regarded as having ceased and whose legal
successor is the VAT group. The members of the VAT group are severally and
jointly liable for the VAT obligation of the other members which have arisen
before and during their membership in the VAT group.
6. The members of the VAT group are regarded as a single taxable person. The rights
and obligations of the VAT group are exercised by a representative elected by its
members. Regarding that the VAT group is a single taxable person, a VAT group
is identified by a single tax number for VAT purposes, files its own VAT return
monthly indicating the tax payable, and tax deductible of the group.
According to the points set up in document TAXUD/2161/07 the VAT group under the
Hungarian legislation can be characterised with the followings:
(1) only taxable persons can be members of the group,
(2) the members must be established in Hungary,
(3) the financial, economical and organisational links must exist simultaneously,
(4) the VAT group is a single taxable person,
(5) the VAT group is identified by a single tax number,
(6) one taxable person can belong to one VAT group, it is not possible that only some of
its activities form part of a VAT group,
(7) as the VAT group is a single taxable person, the tax deductible has to be established
regarding the transactions of the VAT group with third persons,
(8) a VAT group is not limited to certain activities or sectors.
The Act on VAT has no special provisions concerning the bankruptcy of the member of
the VAT group, but also in this case the other members are jointly and severally liable for
the VAT obligation of this member.
I hope that the information above will be sufficient in order to prepare the forthcoming
meeting of the VAT Committee and to evaluate the request. Should you need further
clarification of any of the provisions, we will be glad to assist you.
Yours sincerely,
Head of Department
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VAT grouping
Section 8
(1) Taxpayers
(a) who have established their place of business in Hungary or, in the absence of such a
place of business, have their permanent address or usually reside in Hungary, and,
b) who in combination constitute linked undertakings,
may establish a VAT group.
(2) Under the VAT grouping:
(a) in-group activity between the taxable persons specified in subsection (1) above (for the
purposes of this Section hereinafter referred to as ‘member’ or ‘members’) ceases to count
as economic activity and the independent taxable person status of the members is also
terminated with the exception set out in subsection (6), and,
(b) economic activity in external relations between members and third parties gives rise to
taxable person status where the related rights and obligations pertain jointly to all the
members participating in the VAT grouping.
(3) The VAT group is created with the permission of the tax authority, upon the written,
express and unanimous request of all proposed members to that effect. No taxpayer shall
apply for VAT grouping status if he already participates in another VAT group as a
member or has already submitted an application for the establishment of another VAT
group the assessment procedure of which has not been completed with final effect. If there
is a taxable person who satisfies the conditions set out in subsection (1) above but does
not intend to participate as member in the VAT group (for the purposes of this Section
hereinafter referred to as ‘non-participating taxable person’), the application shall also
contain the consenting statement of the non-participating taxable person to the creation of
the VAT group. The application and, in the case of the non-participating taxable person,
the consenting statement shall also contain the following:
(a) the identity of the representative appointed by the members and his unconditional
statement of acceptance of appointment as representative, as well as;
(b) separately for each member:
(ba) the name, address and tax number of the member;
(bb) a certificate of the existence of the legal status described in subsection (1);
(bc) a description of the account-keeping system, which must be suitable for the
unambiguous, faithful and complete separation of the in-group and external relations
mentioned in subsection (2);
(bd) an undertaking to meet the obligation set out in subsection (6);
(c) in the case of a non-participating taxable person:
(ca) the name, address and tax number of the taxable person;
(cb) a certificate of the existence of the legal status described in subsection (1);
(cc) an undertaking to meet the obligation set out in subsection (7).
(4) For the duration of the VAT group, all the members participating in the VAT group
shall be regarded as a single taxable person. The subject of any judicial or other official
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procedural acts relating to the exercise of rights and obligations arising from the taxable
person status shall be the representative designated by the members participating in the
VAT group.
(5) Any member who operated, prior to the VAT group status, as a taxable person
identified for VAT purposes in Hungary shall perform its obligations set out in this Act,
the accounting date being the day preceding the date on which the permission of the tax
authority mentioned in subsection (3) becomes final, as if it had terminated its activities
with legal succession.
(6) Any member participating in a VAT group shall, both during the existence of the VAT
group and thereafter, be jointly and severally liable, together with all the other members
participating in the VAT group, for:
(a) the performance of the obligation of any VAT group member as set out in subsections
(5) and (9) that arose before the existence of the VAT group, and;
(b) the performance of the obligations arising from this Act of any VAT group member
during the existence of the VAT group.
(7) Any non-participating legal person shall, both during the existence of the VAT group
and thereafter, be jointly and severally liable, together with all the members participating
in the VAT group, for:
(a) the performance of the obligation of any VAT group member as set out in subsections
(5) and (9) that arose before the existence of the VAT group, and;
(b) the performance of the obligations of any VAT group member arising pursuant to this
Act during the period of existence of the VAT group.
(8) A non-participating taxable person or a taxable person established in the period of
VAT grouping who satisfies the conditions set out in subsection (1) (for the purposes of
this Section, hereinafter referred to as 'joining new taxable person’) may opt to join the
VAT group as a member. Joining the VAT group requires the permission of the tax
authority acting upon the express written application of the non-participating or joining
new taxable person to that effect. The application shall also contain the joint, express and
unanimous statement of consent of all members of the VAT group to the accession of the
non-participating or joining new taxable person. The application shall also demonstrate
that the requirements set out:
(a) in points (bc) and (bd) of subsection (3), in the case of non-participating taxable
persons;
(b) in point b) of subsection (3), in the case of joining new taxable persons;
are satisfied.
(9) The non-participating taxpayer or joining new taxpayer who joins the VAT group as a
member shall perform its obligations set out in this Act, the accounting date being the day
preceding the date on which the permission of the tax authority mentioned in subsection
(8) becomes final, as if it had terminated its activities with legal succession.
(10) A member participating in a VAT group may opt to leave the VAT group. Departure
from the VAT group is subject to the permission of the tax authority acting upon the
express written application of the member proposing to leave the group to that effect. The
application shall also contain the joint, express and unanimous statement of consent of all
other members of the VAT group to the departure. Furthermore, the application shall
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contain the undertaking of the member proposing to depart that as of the date of the
departure becoming final, he shall satisfy the obligation set out in point (cc) of subsection
(3) as a non-participating taxable person.
(11) VAT grouping is terminated upon the revocation of the permission of the tax
authority. The tax authority shall revoke the permission if:
(a) so requested by any member of the VAT group, with the exception of the application
for departure described in subsection (10);
(b) the representative refuses to act as such in the future, and no new representative is
designated and notified as per point (a) of subsection (3);
(c) any member of the VAT group fails to satisfy the conditions laid down in subsection
(1);
(d) any of the conditions laid down in points (bc) or (bd) of subsection (3) is not satisfied
during the existence of the VAT group;
(e) the condition laid down in point (cc) of subsection (3) is not satisfied during the
existence of the VAT group;
(f) during the existence of the VAT group, a taxable person is established who satisfies
the conditions set out in subsection (1) and who:
(fa) does not join the VAT group but as a non-participating member fails to abide by the
obligations set out in point (c) of subsection (3);
(fb) intends to joint the VAT group as a joining new member but the tax authority refuses
to grant permission pursuant to subsection (8);
(g) all the members of the VAT group are terminated without legal succession.
(12) All the members participating in the tax group shall collectively perform their
obligations set out in this Act, the accounting date being the date on which the revocation
of the permission of the tax authority mentioned in subsection (11) becomes final, as if it
had terminated its activities with legal succession, except where all the members of the
VAT group are terminated without legal succession.
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