Weekly VAT Update – 26 September 2017
DNB Banka and others and the cost sharing exemption
This case involved DNB Banka and Aviva. DNB Banka, a credit institution registered in Latvia, was interested in the cost sharing exemption as it applies to banks and financial institutions. Aviva, part of Aviva group, was interested in how the cost sharing exemption applies to insurance companies. In DNB Banka there were various services between group companies – some of which were in different EU states, as well as services received from third parties. These costs were divided up under the cost sharing exemption, which in the case of DNB Banka was disputed by the Latvian VAT authorities. Advocate General Kokott had previously issued her opinion but the CJEC has now issued a more restrictive ruling. The CJEC has ruled that the cost sharing exemption should apply only to activities that are exempted under Article 132 i.e. those that are in the public interest, and not those exempted under Article 135 i.e. finance and insurance. The judgment will have important implications in those Member States that do not permit VAT grouping. Certain Member States will also have to amend their legislation top comply with these decisions.