Norddeutsche Gesellschaft für Diakonie: Conditions of VAT-Group Membership
Member states may designate the controlling entity of a VAT group as its single taxable person, provided it can impose its will on the other members and no risk of tax losses arises. However, a national rule making financial integration conditional on the controlling person holding a majority of voting rights in addition to a majority shareholding goes beyond the Directive and is impermissible.
Facts
The German administration denied a tax unity (Organschaft) between Norddeutsche Gesellschaft für Diakonie and its shareholder because, despite control, the shareholder lacked the majority of voting rights required by German practice. The Bundesfinanzhof asked who may be the group's taxable person and which financial-integration conditions are compatible with the Sixth Directive.
Legal assessment
The Court confirmed that VAT grouping allows the controlling entity to act and account for the tax on behalf of the group, provided correct collection is ensured — designating a group 'representative' does not as such contradict the Directive. At the same time, membership conditions must not be stricter than the Directive envisages: the cumulative requirement of a majority shareholding plus a majority of voting rights excludes entities with genuinely close financial links and is a disproportionate narrowing. Group members also do not cease to carry out independent economic activity merely because the group accounts for their tax.
Practical impact
Practically for Czechia: a VAT-group member does not act under its own VAT ID but under the group ID in the CZ699xxxxxxx format — intra-group supplies are outside the scope and the group acts externally. When screening a counterparty, an 'empty' result for the member's own ID therefore does not mean non-registration; look for the group ID (our VAT checker recognises membership and shows the group ID automatically). Before joining a group, weigh the flip side: members' joint and several liability for the whole group's tax. If the authority refuses registration on an overly strict reading of financial links, argue the Directive directly — cumulative conditions beyond it do not stand per the CJEU.