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Potential increased VAT bills for banks and insurers – European Court ruling: Skandia America Corporation

19 September 2014

The European Court of Justice has just given a ruling that could mean increased VAT bills for banks and insurers. The case involved Skandia America Corporation and the Swedish Tax Authorities, and the court’s decision means that banks and insurance companies may have to charge VAT on the services provided by a group head office to its branches.

This could mean that banks and insurers face a VAT bill on their internal costs, as well as any VAT they may already pay on their external costs. For VAT exempt business like banks and insurers, this will in most cases be a real tax ‘hit’ as they usually cannot recover most of the VAT they incur on paying for goods and services.

Some commentators are suggesting this could add hundreds of millions of pounds/euros to their costs. It remains to be seen exactly how member states will implement this decision in their own jurisdictions, but banks and insurers will need to keep a close eye on this.

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