In a Belgian case (C‑232/22) resolved on 29 June 2023, CJEU spoke again about the issue of fixed establishment (FE) for VAT purposes.

The case concerned production services provided under an exclusivity clause by a Belgian contract manufacturer to its indirectly related affiliate (common control) from Switzerland on a toll manufacturing basis. Under the business model employed, the contract manufacturer stores on its premises the raw materials purchased by the Swiss party, processes them using its own equipment into products, and then stores the products before they are sold by the Swiss company. The agreement also provided for a number of ancillary services to be provided by the Belgian company (including logistics, warehousing, planning and administration). The sale of services to the Swiss company constituted almost all of Belgian manufacturer’s turnover.

The court held that, under that model, no FE arises in Belgium for the Swiss company due to absence of sufficient technical and human resources in that country. CJEU’s judgment offers some FE insights of a more general nature:

  • A foreign entity will not have an FE in a given country due to its relationship with a service provider from the country as long as the entity does not have in that country human and technical resources to which it has immediate and permanent access as if they were its own resources.
  • A services agreement (even if exclusive) does not in itself generate an FE if the provider performs the services at its own risk and is responsible for its own resources.
  • For resources to generate an FE, they cannot be a recipient of the services provided by the very FE.

If this issue pertains to your business and you are interested in our assistance, please contact us.

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