VAT Committee (Working Paper No 968): interesting views on the concept of a fixed establishment for VAT purposes
The European VAT Committee has recently published a new Working Paper on the implementation of “the Quick Fixes Package”, which will come into effect as of the 1st of January 2020. Part of the subject matter covered, is the question whether a call-off stock warehouse can be considered to be a fixed establishment of the supplier.
As is commonly known, the guidelines and views of the VAT Committee do not have legal effect, yet, often provide a view on how VAT related issues and open questions should be answered. Therefore, it is worth noting the considerations of the VAT committee. Especially, as the committee’s views do not seem to be in line with the current Belgian administrative point of views and practice.
In the above mentioned guidelines, the delegates raised the issue whether for the purposes of Article 17a of the VAT Directive the supplier could be the stock keeper in the Member State of arrival of the goods without necessarily being seen as having a fixed establishment for VAT purposes there.
This is a relevant question as one of the conditions for the call-off stock simplification to apply is that the supplier has not established his business nor has a fixed establishment in the Member State to which the goods are dispatched or transported. Therefore it is important to know whether the supplier having a warehouse to which he moves his own goods would automatically be excluded from the call-off stock arrangements simplification because of him being seen as having a fixed establishment in the Member State of the arrival of goods.
The Court of Justice of the European Union (CJEU) has dealt on various occasions with the issue of fixed establishment. In accordance with the CJEU’s case law any such an establishment must be characterized by a sufficient degree of permanence and a suitable structure in terms of human and technical resources to enable it to supply services or to receive and use the services supplied to it for its own needs. It is important to underline that the CJEU has focused on the notion of fixed establishment only in relation to the rules on place of supply of services. In this context the CJEU held that the application of the rules should lead to a rational result, avoiding conflicts between Member States.
In order to detail its views, the VAT Committee went into detail on various scenarios that could arise.
Firstly, in the situation where the warehouse is owned and run by the acquirer or in the case where the warehouse is owned and run by a third person, different from the supplier and the acquirer, the committee is of the opinion that this (call-off stock) warehouse is not a fixed establishment of the supplier.
Secondly, in the situation where the supplier owns the warehouse, in the Commission services’ opinion, he does have a sufficient degree of permanence/material link with the warehouse to see it as creating a fixed establishment for him. This would be so regardless of whether he is running the warehouse himself or rents it out to another person.
If the supplier, apart from owning the call-off stock warehouse, is also running it (indirectly or through his own employees) with the aim of supplying the goods to his clients then he should be seen as having a suitable, sufficiently permanent, structure not only in terms of technical resources but also in terms of human resources, which allows to consider the warehouse as his fixed establishment in the Member State where it is located.
If the supplier is renting the warehouse to a third person (who still allows the supplier to store his own goods there) then the supplier is providing a rental service, the warehouse being the object of that rental service. It seems that the warehouse should be seen as an establishment characterized by a sufficient degree of permanence and a suitable structure in terms of human and technical resources to enable the supplier to provide the rental service. The warehouse would therefore have to be seen as his fixed establishment (of the supplier) in the Member State of arrival of the goods.
Thirdly, and most interestingly in our view, the VAT Committee assesses the situation in which the warehouse is owned by a third party (who has rented it to the supplier) and where the supplier is also hiring an independent third party that will run it for him. According to the VAT committee, in this situation, the supplier should be seen as having a fixed establishment in the Member State concerned.
