Comments on ECJ C-232/22: No fixed establishment for VAT purposes in case one company uses its subsidiary to produce goods in a Member State of the EU

On June 29, 2023, the Court of Justice of the European Union clarified that a taxable person who receives production services from a subsidiary does not have a fixed establishment in the EU Member State where the subsidiary operates, unless it has control over the subsidiary’s resources.
The case involves Cabot Switzerland, a company based in Switzerland registered for VAT purposes in Belgium. Cabot Switzerland has a tolling contract with Cabot Plastics Belgium, where the latter stores and processes raw materials on behalf of the former.
Cabot Belgium also provides additional services such as customs warehousing and product management.
The Court was asked to interpret Directive 2006/112/EC and Implementing Regulation (EU) 282/2011 to determine if a taxable person outside the EU has a fixed establishment in the Member State where the service provider is located.
The Court considered factors such as ownership of resources, independence of the entities, exclusive contractual undertaking, availability of services in the provider’s country, and contribution to the recipient’s economic activity.
The Court emphasized that the place of supply for general services is generally where the recipient has established its business.
A permanent establishment for VAT purposes is only relevant when the place of business criterion is not applicable.
The Court referred to previous cases to determine if the recipient has sufficient human and technical means in the Member State where the services are carried out. The Court concluded that owning the resources is not a requirement for the taxable person but having control over them is important.

Source PwC