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VAT Grouping versus Freedom of Establishment

According to Article 11 of the EC VAT Directive, Member States may regard as a single taxable person any persons established in the territory of that Member State who, while legally independent, are closely bound to one another by financial, economic, and organizational links. This provision requires that the undertakings in question are established in the same Member State, for which reason it is not possible to form a cross-border VAT group. In the doctrine, it has been argued that this territorial restriction is in breach of the rules on freedom of establishment in the Treaty on the Functioning of the European Union (TFEU). In the present article, this issue will be analysed further.