Supreme Court rules that German owners, that rent a holiday home in the Netherlands through a rental agency, do not have a permanent establishment

For the purpose of answering the question whether an establishment for the levying of turnover tax can be regarded as the permanent establishment of the entrepreneur, it must first be taken into account that an establishment can only be regarded as a permanent establishment if it has a sufficient degree of of sustainability and a – as far as personnel and technical resources are concerned – suitable structure to be able to provide services and to be able to purchase services provided for their own needs (see ECJ 17 July 1997, ARO Lease BV, C- 190/95, ECLI: EU: C: 1997: 374, hereinafter: ARO Lease, paragraph 16, and CJEU 16 October 2014, Welmory sp. Z oo, C-605/12, ECLI: EU: C: 2014: 2298, paragraph 58).

Secondly, it must be held that an establishment can only be regarded as a permanent establishment if it is not autonomous, but depends on the trader from whom it forms an establishment and, in particular, that it is not exposed to economic business risk itself. A permanent establishment forms with the entrepreneur from whom it is dependent a single taxpayer (cf. ECJ 23 March 2006, FCE Bank plc., C-210/04, ECLI: EU: C: 2006: 196, points 35 to 37).

The complaints rightly do not dispute the Court’s view that the rental office is not a permanent establishment of interested parties. In view of the fact that the Court has established – in cassation undisputed – the activities of the rental agency, it must be held that the rental office is not dependent on interested parties as referred to in 2.3.1.

In so far as the complaints state that the Court failed to give an opinion on the proposition that the holiday home constitutes a permanent establishment of interested parties in connection with the activities of the rental office, they are rightly proposed. This statement is reproduced in the minutes of the Court’s hearing, while the judgment does not show that the Court has taken account of that statement. However, the complaints can not lead to cassation in so far as the Court could not have rejected that statement, in view of what is being considered below.

From what has been stated above, it follows that an asset that is exploited within the meaning of Article 7, paragraph 2, letter b, of the Act – such as a rented holiday home – can not be considered in isolation as a permanent establishment. If there is a structure that is suitable to enable an independent operation of the rental services in the Netherlands, then the entrepreneur in the Netherlands must also have its own personnel and a structure with a sufficient degree of sustainability, within the framework of which the lease agreements can be whether decisions can be taken on a daily basis (see ARO Lease, paragraph 19). The use made by the entrepreneur of the services of an independent intermediary can not contribute in this respect to the opinion that the entrepreneur has a permanent establishment.

In the opinion of the Court in 2.2 above that the rental office carries out its activities independently of the stakeholder company, it is decided that the rental office acts as an independent intermediary vis-à-vis the interested parties. That judgment is factual and not incomprehensible. On that assumption, the rental office can not be regarded as its own staff of stakeholders or as a structure with which stakeholders take decisions of day-to-day management. The fact that interested parties use the services of the rental agency can not therefore have the consequence that the holiday home forms a permanent establishment in the Netherlands in connection with the activities of the rental agency.

Source: (Dutch)