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Taxation and Customs Union

Taxable persons under EU VAT rules

What are taxable persons?

In practice, a taxable person is generally a business, sole trader or professional. With this status, they are responsible for charging, collecting and paying VAT to the tax authorities, and documenting all this in a VAT return.

Employees are not treated as taxable persons (Article 10 VAT Directive).

The definition of a taxable person in the VAT Directive is any person or body “who, independently, carries out in any place any economic activity, whatever the purpose or results”.

Economic activity broadly means any business activity.

For details see Article 9 VAT Directive.

EU VAT rules cover taxable persons even if their activity is carried out or they are based (established) outside the EU.

What are not taxable persons?

Private individuals

Private individuals are not generally involved in business and will therefore not be classed as taxable persons.


  • Any private person who sells a vehicle that still qualifies as new to someone in another EU country (an intra-EU supply of a new means of transport) is always considered a taxable person for that sale (Article 9(2) VAT Directive)
  • Any EU country can choose to class as taxable persons any private person who occasionally sells things like land or buildings (Article 12VAT Directive).

Public bodies

Public bodies (national, regional or local government or any other body governed by public law) are generally not regarded as taxable persons under EU VAT law for most of their activities.
It covers activities of public bodies but only if carried out in their capacity as public authorities. The activities must therefore be covered by a special legal regime applicable to the public body.
(Article 13 VAT Directive)

Exception 1 – public sector activities of scale

Because such a body is regarded as a non-taxable person, its activities fall outside the scope of the VAT and are not taxed. If it leads to “significant distortions of competition”, the public body will nevertheless be classed as a taxable person. This is to prevent any major distortions to competition.

Exception 2 – private sector activities

If a public body carries out – on anything other than a “negligible scale” – any activity that is also performed by the private sector, it will be regarded as a taxable person for those activities. This is because non-taxation could potentially distort competition.
These activities are listed in Annex I VAT Directive:

  • telecommunications services
  • supplying water, gas, electricity or thermal energy
  • transporting goods
  • port or airport services
  • passenger transport
  • supplying new manufactured goods
  • transactions involving agricultural products carried out by agricultural intervention agencies under EU regulations
  • organizing trade fairs and exhibitions
  • warehousing
  • commercial publicity activities
  • travel agent services
  • running staff shops, cooperatives or industrial canteens and similar
  • commercial radio or television activities.

Exception 3 – exempt activities

Certain activities carried out by public bodies are considered to be in the public interest and so are exempt (without the right to deduct) from VAT in every EU country (Article 132 VAT Directive).

These activities are:

  • hospital and medical care and closely related activities
  • supplying goods or services linked to welfare and social security work, including old people’s homes
  • supplying goods or services linked to the protection of children and young persons
  • providing education, school or university education, vocational training or retraining, and related goods or services
  • supplying goods or services to members, for a subscription (but only if the VAT exemption is not likely to distort competition)
  • supplying certain services linked to sport or physical education
  • supplying certain cultural services, and related goods

VAT groups

Under EU VAT law, the tax authorities in any EU country have the option of allowing groups of closely-linked companies (including non-taxable entities) to be treated as a single taxable person.

For this to happen, these companies (which can be legally independent of one another) must make a joint registration for VAT, and they then become a VAT group (Article 11 VAT Directive).

What are the benefits of VAT groups for companies?
Mainly this means lowercompliance burdens, because members can account for VAT as a single entity, so for example:

  • they only need to fill out one VAT return for the whole group
  • they do not need to issue VAT invoices for transactions between members (these are not taken into account for VAT purposes).

Conditions for registering as a VAT group

  • Members of a VAT group can be companies, other corporate bodies
  • Members must have close “financial, economic and organizational links”
  • Members must be established in the EU country where the group is registered
  • National tax authorities may determine more detailed rules on eligibility, joining or leaving a VAT group and other administrative measures
  • Any EU country that uses VAT groups is allowed to introduce its own measures to combat any associated tax avoidance or evasion.