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DGT Consultation: Permanent Establishment and VAT Considerations for UK Software Development Office

  • An office with personnel developing an application to be marketed in the UK is not considered a permanent establishment for VAT purposes.
  • The consulting company, based in the UK, is engaged in software development and has rented an office in the territory where the tax applies.
  • The office is considered a permanent establishment for income tax purposes and has a tax identification number.
  • The office will not provide services or deliver goods to third parties, but will only perform development tasks for an application to be marketed in the UK.
  • According to the Court of Justice of the European Union, a permanent establishment must have an adequate structure in terms of human and technical resources, with a sufficient degree of permanence.
  • Having a VAT identification number is not sufficient to consider a taxpayer as having a permanent establishment.
  • The Court of Justice defines four necessary conditions for granting the status of a permanent establishment.
  • The fourth condition, autonomy in the provision of services or activities, is not met in this specific case.
  • The office in the territory where the tax applies resembles a cost center for the development of an internal project that will be commercialized by the consulting company.
  • Therefore, the services received by the consulting company will not be subject to the tax in the territory where it applies.


Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.


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