35-years of VAT fixed establishments – review of landmark judgements


In 2020 the concept of a fixed establishment (FE) was exactly 35 years old. Although it was first mentioned in the Sixth VAT Directive in 1977, no definition was provided at that time. The first FE definition was developed by the Court of Justice of the European Union in its landmark judgement in the Berkholz (168/84) case in 1985. This definition was subsequently included into the VAT Implementing Regulation in 2011. As the Berkholz case was decided exactly 35 years ago, it’s worth revisiting the most important CJEU cases about the FE concept.

Berkholz (168/84)

The CJEU ruled that an FE required the permanent presence of both the human and technical resources necessary for the provision of services. The place where the supplier has established its business should act as the “primary point of reference” for determining the place of supply of services. However, if this does not lead to a rational result, an FE may be considered as the place of supply.

DFDS (C-260/95)

The CJEU was asked to provide guidance on the FE concept for the purposes of article 26 of the Sixth VAT Directive (special scheme for travel agents) and to answer the question whether a separate legal entity (a subsidiary in another Member State) could constitute an FE. The Court ruled that a subsidiary may be regarded as a FE of the parent company if it acts as a mere auxiliary organ of the parent and has the human and technical resources characteristic of an FE.

ARO Lease (C-190/95) and Lease Plan Luxembourg (C-390/96)

In the ARO Lease case, the CJEU did not consider a fleet of cars in Belgium to be an FE of a Dutch company. The Court held that the leasing of vehicles consisted principally in the negotiating, signing and administering of the relevant agreements; therefore, a leasing company that did not possess in a Member State either its own staff or a structure which has a sufficient degree of permanence to provide a framework in which agreements may be drawn up or management decisions taken could not be regarded as having a FE in that country.

The Lease Plan Luxembourg case (C-390/96) involved a similar situation: the lease of passenger cars by a Luxembourg company, Lease Plan Luxembourg, to Belgian customers. The CJEU merely repeated its position, expressly referring to the ARO Lease judgment.

RAL (C-452/03)

The RAL case concerned the exploitation of gaming machines and whether they could constitute an FE of a non-resident company. The CJEU did not comment on the FE issue in its judgement but applied the VAT rules on entertainment and similar activities. An interesting point was made in the Opinion of Advocate General who said that the RAL Group’s gaming machines in the United Kingdom satisfied the “minimum-requirements test” for the existence of an FE.

Planzer Luxembourg (C-73/06)

The Planzer Luxembourg case concerned the application of the VAT refund rules of the Thirteenth Council Directive (86/560/EEC). The CJEU made it clear that the performance of preparatory and auxiliary activities did not give rise to an FE.

Daimler (C-318/11) and Widex (C-319/11)

Both cases concerned the FE concept for the purposes of VAT refund rules of Directive 2008/9. The CJEU was asked whether a taxable person carrying out technical testing or research work in another Member State could be regarded as having an FE in that other Member State. The Court ruled that a right to VAT was excluded if two conditions were cumulatively present: (1) the presence of an FE and (2) taxable transactions were carried out by the FE. Since no output transactions were performed by Daimler and Widex in Sweden, the right to refund could not be excluded irrespective of whether or not they had an FE in that State.

E.ON Global Commodities SE (C-323/12)

This was another case concerning the right to VAT refund. The CJEU ruled that a tax representative did not constitute an FE for the purposes of Eighth Council Directive (79/1072/EEC). Therefore, E.ON’s right to VAT refund could not be excluded based on the fact that it designated a tax representative in Romania.

Welmory (C-605/12)

The Welmory case was the first one where the CJEU was asked to interpret the concept of a “receiving FE” (i.e. an FE that is a recipient of services within the meaning of article 44 of the VAT Directive). The CJEU was asked to determine whether by using the infrastructure of the supplier (the Polish Welmory) the customer (the Cypriot Welmory) had an FE in the Member State of the supplier (Poland). The Court did not provide a clear answer as to whether this structure could give rise to an FE. Instead, it asked the referring court to determine whether the Cypriot Welmory had the necessary human and technical resources to receive and use the services in Poland and its degree of independence.

WebMindLicences (C-419/14)

The WebMindLicences case did not focus on the concept of an FE but on the activities which must be performed by an FE in order for the services to be considered to have been supplied from there. The CJEU ruled that services are supplied from an FE if the FE is engaged in the economic activity in its own name and on its own behalf, under its own responsibility and at its own risk.

Dong Yang Electronics (C-547/18)

In Dong Yang Electronics, the CJEU was asked whether an EU subsidiary may be regarded as an FE of a parent company established outside the European Union. The Court noted that the mere fact that a third-country company had a subsidiary in the EU did not mean that there was indeed an FE. The qualification as an FE did not depend of the legal form, but on the material conditions that must be assessed in the light of economic and commercial reality. The CJEU also concluded that a supplier does not need to investigate contractual relationships between the customer and its subsidiaries to determine whether a subsidiary may be regarded as an FE for VAT purposes.