The Romanian tax authorities have taken the position that local toll manufacturing arrangements result in a foreign principal having a fixed establishment for VAT purposes in the European Union (EU) Member State of the toll manufacturer, i.e., Romania.
“The tax authority’s position appears to be based on the principles established in the European Court of Justice (ECJ) case of Welmory (C-605/12). The Romanian tax authorities consider certain activities performed by Romanian toll manufacturers under common toll manufacturing arrangements sufficient to support that the principal utilizes the necessary human and technical resources to create a fixed establishment for VAT purposes in Romania.
In particular, where the Romanian manufacturer provides not only manufacturing services but also auxiliary and administrative services. It is, however, not without question whether this interpretation is compatible with EU VAT provisions and the principles established by European case law regarding fixed establishments. Specifically, in light of the fact that the ECJ in the case of Welmory has not addressed a number of points which appear relevant here, not least the questions under which exact circumstances human and technical resources/infrastructure of one business should be attributable to another business and thereby creating a fixed establishment for VAT purposes.”