Concept of Fixed Establishment remains a huge concern for businesses …… an overview of recent developments

The concept of Fixed Establishment remains an issue for businesses. Whether a company has a Fixed Establishment for VAT is important to determine the place of supply of services and the liability to pay VAT. When businesses have the full right to deduct input VAT, the impact of a Fixed Establishment for VAT purposes could be regarded “only cash flow”. Still, having a a Fixed Establisment (or not) allows local tax authorities to levy interests and penalties on companies, and the administrative requirements (including invoicing) may be different. Also, even though the concept of a Fixed Establishment for VAT purposes is not the same as the concept of Permanent Establishment for direct tax purposes, businesses are concerned that tax authorities will claim a Permanent Establishment based on the existence of a Fixed Establishment.

Over the past couple of months, the concept of Fixed Establishments has been discussed at the level of the European Commission, in ECJ cases, and in local court cases in the Member States. prepared the overview of the recent developments.


At the 113th meeting of the VAT committee, the implementation of the Quick Fixes was discussed. This included a discussion on whether the (new) call-off stock arrangements would result (or not) in a Fixed Establishment for VAT purposes for the owner of the consignment stock in another Member State. We understand there was no consensus amongst the delegations of the Member States at least on some points. The outcome of the VAT Committee was also mentioned in the Explanatory Notes on Quick Fixes which were issued end of December 2019.


There have been many ECJ court cases already decided in the past. The uncertainty remained. Business were looking forward to the decision of the Dong Yang (C-547/18) case. The Opinion  of the AG was very promising, and if that opinion would be followed, it may have been a good outcome for businesses and offer opportunities to avoid discussions with tax authorities. The jugdment itself was somewhat disappointing in that respect, as the ECJ did not ‘burn its fingers’ and gave a somewhat ‘tame’ decision. Recently, another Question has been raised by an Austrian Court on Fixed Establishments, something to look forward to.


The concept Fixed Establishment has been discussed recently in Poland, Spain, and Germany. The outcome was mixed, which shows the uncertainty around the concept.





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