Court decision: Warehousing services by a Polish entity for the account of a Portguese entity leads to a Fixed Establishment

The Polish Court decided that a foreign business had a fixed establishment for VAT.

The case concerns a Portuguese manufacturer of single-use medical devices. It was registered as a non-resident business in Poland.

The company purchased raw materials in Portugal and Ukriane, which were transported to Poland. The company imports raw materials from other countries in order to transform them into products later, subcontracting warehousing and logistics services in Poland for this purpose. The company does not have a production plant in Poland and does not provide any services.

The final products are sold onto the Polish market through a distributor. The distributor’s task is to acquire customers, e.g. through public tenders and the analysis of market information, which make it possible to place orders with the Portuguese company, in order to produce and sell goods.

The goods are sold to the distributor and then delivered to his warehouse. It is the responsibility of the distributor to sell the products to end customers.

In Poland, the Portuguese company uses the warehouse service provided by the Polish entity C Sp. z o. o. The warehouse is located in Poland. The Portuguese company is not the owner or tenant of this warehouse, it is only the recipient of the warehouse service. The Polish entity that provides warehousing services (C) is an entity independent of the complainant.

Besides these warehousing and logistics services, the Portuguese company purchases also other services from Polish entrepreneurs, such as accounting services (in the field of preparing and submitting VAT-7 VAT-UE tax returns and JPK_VAT file on behalf of the company), customs agency services, and consulting, marketing, translation and ongoing sales support services.

The question arose, if the Portuguese company had a fixed establishment for VAT in Poland.

Source Central Database of Administrative Court Decisions

Unofficial translation in English

See also Court decision: Does a Polish subcontractor performing logistic services lead to a Fixed Establishment?

Other sources

Note from the editors: The Portuguese company seems to have all the right facts and arguments to have no fixed establishment for VAT in Poland. It checks the whole list of requirements listed by the ECJ in earlier cases. Yet, somehow, the Polish authorities are still not convinced. The Polish authorities focus on the Welmory-case, where the ECJ decided that the foreign company can have a fixed establishment if it uses the human and technical resources of another entity. If a foreign business has the ‘organizational structure necessary to perform taxable activities’ at its disposal, is already sufficient for a fixed establishment.

Surprisingly, the Polish Court follows the approach of the tax authorities. The Polish Court decides that the Portuguese entity, by entering into service agreements with Polish service providers, had sufficient human and technical resources in Poland, and because the contracts were ‘long-term’, there was also sufficient permanence. The Portuguese company had stock, it made sales, and (via the service providers) it had a marketing and sales organisation in Poland.

The Opinion or the Judgment in the Dong Yang-case is no-where mentioned, although this case was decided after the Dong Yang-case. It seems that the Polish authorities have not given up on ‘bullying’ foreign businesses yet. And unfortunately, Poland is not the only country doing this… Businesses: be warned! – Do not think that with the Opinion of the AG in Dong Yang you can lay back and relax!

The case also deals with the question if the Portuguese company is obliged to issue a VAT invoice for the movement of its own goods from Poland to Portugal and vice versa. This topic shows the difference in interpretation by the different Member States again, with regard to the administrative requirements that businesses have to deal with.

See also our post with an overview of the recent developments HERE


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