On 7 April 2022, the Court of Justice of the European Union (“CJEU”) handed down its judgment in case C-333/20 involving the interpretation of Article 44 of the Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax (“Case”).
The issue was whether the human and technical resources of a subsidiary in another Member State constitute a fixed establishment for VAT purposes.
While the Case was of a Romanian origin, it may be extremely relevant also for Polish businesses. Polish tax administration often claims that foreign service recipients have fixed establishments in Poland for VAT purposes. And Polish service providers will be heavily affected if their foreign parents as service recipients are held to have fixed establishments in Poland based on their Polish subsidiaries’ human and technical resources. The reason is that, in such cases, Polish tax authorities challenge the application of reverse charge to their services and instead require the services to be treated as domestic transactions.
CJEU resolved the Case on a positive note. The court held that a company with its registered office in one Member State does not have a fixed establishment in another Member State on the ground that that company owns a subsidiary there that makes available to it human and technical resources under contracts by means of which that subsidiary provides, exclusively to it, marketing, regulatory, advertising and representation services that are capable of having a direct influence on the volume of its sales.
The Case is another example of how CJEU has recently taken the side of taxable persons when interpreting the concept of fixed establishment in the context of use of human and technical resources of a subsidiary located in another Member State (see also case C-931/19 Titanium Ltd., judgment of 3 June 2021).
We hope the court’s line of authority will prompt Polish tax administration to change its approach to the topic of fixed establishments in Poland.
If thiss issue pertains to your business and you are interested in our assistance, please contact us.
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