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VAT Group: What It Is And How It Works

It allows companies that are part of it to enjoy certain advantages, particularly in terms of taxon added value, becoming unique and subjectable to centralize certain tax and organizational obligations. The transfer of goods and the provision of services between companies within the Group will not be relevant for taxable or VAT purposes, while the companies that are part of the Group can invoice transactions to third parties with the group VAT number. All operations carried out by one of the subjects of the Group are considered as carried out by the whole Group.

VAT Group: What It Is And How It Works

The VAT Group is an independent taxable person with its VAT number and Vies registration, composed of other VAT subjects who share financial, economic, and organizational ties. Through the establishment of a VAT Group, the participating subjects. Since its establishment, the VAT Group has been a VAT subject to all intents and purposes and assumes rights and duties deriving from applying the regulations on value-added tax.

Consequently, the individual participants lose their autonomous subjectivity, again for VAT purposes. Among the requirements necessary to create a VAT Group, the law mentions the simultaneous existence of the following constraints:

  • Financial constraint: a relationship of direct or indirect control must exist between the various subjects; as specified by the Revenue Agency, these cases include radial and chain control situations and hybrid situations that include situations of direct and indirect control.
  • Economic constraint: the participating subjects must carry out the same activity as the main activity or complementary or interdependent activities or activities that give a substantial advantage to one or more subjects of the Group itself.
  • Organizational constraint: it is necessary that between these subjects, there is an activity of coordination between the decision-making bodies; in practice, it refers to the definition of an economic policy, strategies, and guidelines that are mutually compliant and valid for all members of the Group. This constraint implies a limitation on the business decisions each participant can take. At the decision-making level, each choice must be subject to the control of the structure and be part of the objectives of the entire Group.

Also Read: How To A Create Payroll In Easy Steps

Effects Of Setting Up A VAT Group

When a company becomes part of a VAT group, it loses its autonomy for VAT purposes: therefore, its invoices must always bear the VAT number of the Group and its own Tax ID code.

How To Set Up A VAT Group

To set up a VAT Group, the persons who decide to join must appoint a representative of the Group itself, who will exercise the online option from the Revenue Agency website in the Services section – Applications, communications, and certificates – Setting up the VAT group. It will be necessary to fill in the AGI/1 Model and send it from the section itself. The declaration of the establishment of the Group must include the following data:

  • The name of the VAT Group;
  • The identification data of the representative of the VAT Group and the parties participating in the Group;
  • The certification of the existence, among the parties participating in the Group, of the financial, economic, and organizational ties;
  • The activity or activities that the VAT Group will carry out;
  • The election of domicile from the Group representative by each person participating in the Group for notification of the deeds and provisions relating to the tax periods for which the option is exercised.

VAT Groups And Electronic Invoicing

Since the VAT Group is a taxable person with its VAT number to all intents and purposes, it follows that, after its establishment, every transaction that a subject of the VAT Group carries out with an external subject is considered to have been carried out by the Group. In the electronic invoice, you will need to report the following:

  • The VAT number of the Group;
  • The tax code of the participant carrying out the transaction.

The annotations in the VAT registers can be carried out by the group representative or by the participants using appropriate sectional registers; periodic liquidations and the payment of the tax payable by the Group, on the other hand, must be made exclusively by the representative of the Group.

Slip Payment In The VAT Group

If in the Group, a subject falls under the split payment regime. The Revenue Agency has clarified that, due to participation in the Group, the subject loses the requirements to fall under the split payment regime.

VAT Group And Ceiling Of Participants For Exports

When there are one or more participants in the Group with ceilings for the status of habitual exporters, the Group acquires the right to carry out VAT-exempt commercial transactions. This right is limited to the total amount of exports and similar operations registered by the participants in the calendar year. The Group representative sends the declarations of intent electronically to the Revenue Agency and the suppliers. The latter can also be presented by the individual participant, indicating their tax code and the VAT number of the Group.

VAT Groups: What Benefits Does It Bring?

Since the VAT Group constitutes a single taxable subject for VAT purposes, it will be the Group itself (in the figure of its representative) that will take charge of the periodic liquidations and make the periodic payments, in addition to the year-end adjustment and all declarative character. The operations will be noted in the sales or payment registers, and the purchases registers in appropriate sectional registers. Setting up a VAT Group certainly brings advantages to the participants, including:

  • The operations of the sale of goods or provision of services between the participants are non-taxable transactions for VAT purposes.
  • The non-taxability of intercompany transactions does not affect the determination of the price applied within the Group: therefore, market logic can be followed in the prices for the sale of goods and services.
  • The society representative unifies the declaration obligations of compensation and VAT payment.
  • Accounting obligations, such as those relating to the documentation and registration of the sale of goods and services, are also facilitated because they are the responsibility of the Group representative.

Also Read: Input Tax Credit Under GST – How To Claim & Calculation Method

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