VATupdate Newsletter Week 29 2025

FLAT

There are people who still believe the Earth is flat.

Not metaphorically. Literally.

Despite satellite images, global navigation systems, and airline routes that only make sense on a globe, the Flat Earth Society persists. Their logic? “We haven’t seen the curve ourselves.” As if international airline pilots are part of some grand NASA conspiracy.

It’s a curious thing—how belief can trump evidence. And in that regard, Flat Earthers are not alone.

In the world of VAT, we too encounter a few “alternative realities.”

There’s the entrepreneur who insists their private yacht—complete with personal chef and a very relaxed-looking labradoodle—is a business asset. Or the company that sets up a fully operational office abroad, hires staff, negotiates contracts… and still insists it has no fixed establishment there. Or the crypto platform that swears its complex token system is entirely VAT-exempt because “it’s all digital and, like, outside the system.”

If this sounds a bit fantastical, that’s because it often is. Somewhere between hopeful interpretation and creative tax planning lies a dimension where facts bend, logic wobbles, and VAT rules get reimagined. Call it the Discworld of indirect taxation—except here, the giant turtle is probably a shell company.

But VAT, much like gravity, isn’t something you can opt out of by simply refusing to acknowledge it. You might believe your Bulgarian call centre isn’t a fixed establishment. You might feel that your yacht is an essential client-facing tool. But unless the facts and circumstances back you up, those beliefs won’t hold up under inspection—especially not from, say, a tax inspector armed with the EU VAT Directive and a clipboard.

Now, sure—VAT law isn’t always as straightforward as we’d like. Sometimes it’s murky, complex, even contradictory. But complexity isn’t the same as chaos. There are rules, precedents, directives, and cases—anchoring us firmly to reality. Or at least, Roundworld.

A recent ECJ case—Cabot Plastics (C‑232/22)—drives this point home. A company believed it could avoid VAT by claiming it had no fixed establishment, despite operating through a local affiliate with staff, warehouses, and the whole shebang. The Court disagreed. A fixed establishment is defined by function, not fiction. You can call it what you like—but if it looks like a duck, quacks like a duck, and issues invoices from Belgium, it’s probably subject to VAT in Belgium.

So here’s to those who keep their feet on the ground (spherical as it may be), base their VAT treatment on substance over belief, and accept that—even if you wish otherwise—a villa in the Algarve doesn’t become a deductible business expense just because you once hosted a Zoom call there.

Have a great summer-We’ll be back with the Newsletter in 2 weeks, after a short summer break. Until then—stay grounded, stay curious, and for heaven’s sake, check your establishment status before launching that cross-border crypto marketplace.

If you have any comments, questions, or ideas that you want to share with us, please send us an email at [email protected] or leave a comment under the posts of this newsletter on LinkedIn.

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