Cost Sharing exemption no longer available to FS Companies

Revenue have issued a guidance note to confirm that the Cost Sharing exemption will no longer be available to companies in the FS sector.

The change comes as a response to the judgements of the CJEU in DNB Banka, Aviva and Commission v Germany.

This exemption is contained within Paragraph 3(1) of Schedule 1 of the VAT Consolidation Act 2010 and states:

“the supply of services by an independent group of persons (being a group that is an independent entity established for the purpose of administrative convenience by person whose activities are exempt from, or are not subject to, tax) for the purpose of rendering to its members the services directly necessary to enable them to carry out their activities, but only if the group recovers from its members the exact amount of each member’s share of the joint expenses”.

The policy change announcement advises that the exemption outlined above must be strictly interpreted and therefore only applies where the activities carried out by those utilizing the exemption are in the public interest. The cost sharing exemption will therefore no longer be available to those in the FS sector.

There is little information provided by the guidance, other than a recommendation to contact your local Revenue branch should you have queries. There is no indication of timing or a mention of a transitional period to allow for the unwinding of such structures in the FS industry.

Many businesses in the sector have availed of the exemption either through the setting up of direct Cost Sharing Groups or through the use of a compliant European Economic Interest Grouping (EEIG).

We recommend that affected businesses review the impact of the withdrawal of the exemption and explore what can be done to mitigate this impact.

If you have any questions please get in touch with Vinny or Richard or your usual Deloitte contact.

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