The Court of Justice of the EU rules on “fixed establishments” in VAT
October 16 saw the publication of the judgment in case C-605/12, Welmory sp. z.o.o. in which the Court of Justice of the EU analyzed the possible existence of a fixed establishment that could be the recipient of certain supplies of services for the purpose of determining the place where they are deemed made, in a case in which the technical elements were not owned by the trader but were outsourced to a third party.
In this case, a company from Cyprus engaged in organizing internet auctions had concluded an agreement with a Polish entity for the use of an internet auction site, including associated services relating to to the leasing of the servers necessary for the site to function and to the display of the goods to be auctioned. In turn, the Polish company agreed to sell the goods on that site.
The question was to determine whether the services supplied by the Polish company were taxable in Poland and not in Cyprus, given that the recipient of the services had a fixed establishment due to the resources outsourced to a third party .
According to the Court judgment, a first taxable person who has established his business in one Member State, and receives services supplied by a second taxable person established in another Member State, must be regarded as having a “fixed establishment” in that other Member State, for the purpose of determining the place of taxation of those services, if that establishment is characterized by a sufficient degree of permanence and a suitable structure in terms of human and technical resources to enable it to receive the services supplied to it and use them for its business, which is for the referring court to ascertain.
We discuss this CJEU judgment in greater detail at this link.
Garrigues Tax Department