Financial services businesses may not be eligible for the European Cost Sharing exemption – opinion of the Advocate General in DNB Banka (C-326/15) and Aviva (C-605/15)


The Advocate General (“AG”) issued its opinion on the application of the cost-sharing exemption (“CSE”) provided by article 132(1)(f) of the VAT Directive in two cases regarding financial services providers (i.e. banks and insurance companies). The opinion of the AG is not in line with the position of the EU Commission and the discussions in various meetings of the VAT Committee in 2010, 2014 and 2015 and it also appears not to be in line with the pending infringement procedures of the EU Commission against Luxembourg (C-274/15) and Germany (C-616/15).

Cost Sharing Exemption

The CSE allows businesses to come together and pool resources as a means of sharing these resources between each other free of VAT (as opposed to procuring services externally with VAT) on the grounds that these resources are directly necessary for the activities of the members of the cost-sharing group. In order to benefit from this exemption, the group needs to consist of entities engaged in VAT-exempt or non-taxable activities and the supplies need to be made by the group to the members at cost.

Currently, the majority of the EU member states allow the application of the CSE to financial services businesses.

Position of the AG

  • The CSE should apply to services supplied by the group to its members and not vice versa (i.e., the contribution of resources by the members of the group to the group (to the pool) is not VAT-exempt).
  • The members eligible for the application of the CSE are companies/bodies acting in the public interest (this excludes financial services businesses).
  • The CSE is only applicable to services supplied between the group and its members established in the same EU member state (i.e., the CSE cannot apply on a cross-border basis).

Potential implications

We anticipate that the impact on the financial services sector will be significant if the Court of Justice of the European Union (“Court”) decides to follow the opinion of the AG. Specifically, the cost of the procurement of services for the benefit of the whole group will be higher (because of irrecoverable VAT). This would mean that financial services businesses would have to consider other available options to manage the VAT costs on the shared services and/or resources. One of the options could be a set-up of a cost-pooling arrangement (cost-contribution arrangement as per chapter VIII of the OECD guidance 2010) to pool resources that are mutually beneficial for all participants and to share the costs of the benefits that each participant derives from the pool. Another option could be to undertake a detailed review of the services supplied between the members to confirm whether they could benefit from the local VAT exemptions.

For the present, we must wait to see if, and to which extent, the Court agrees with the AG’s opinion. However, please do not hesitate to contact us if you would like to discuss the above.


Tobias Meier Kern
Director Indirect Taxes
+41 58 792 4369

Marcella Dzienisik
Senior Manager Indirect Taxes
+41 58 792 4938


Published by

Dieter Wirth

Dieter Wirth
Leiter Finanzdienstleistungen
PwC Schweiz
Birchstrasse 160
Postfach, 8050 Zürich
+41 58 792 44 88

Dieter Wirth is the leader of Financial Services at PwC Switzerland. He joined PwC in 1998. He is a certified tax adviser and an attorney-at-law with extensive working knowledge in capital market transactions, tax due diligence and international tax structuring projects in the financial services sector.