In an unsurprising, but helpful, decision the European Court of Justice (ECJ) has confirmed the requirements for a taxable person established in one member state, receiving cross-border supplies of services, to have a “fixed establishment” in another member state.

The rules on the place of supply of services changed with effect from 1 January 2010. Although the focus shifted to the place of establishment of the recipient of the services, the ECJ has confirmed that decisions on the meaning of “establishment” that pre-date the change still stand.

In this particular case, the ECJ held that the Cypriot recipient company did not have an establishment in Poland with a sufficient degree of permanence nor a suitable structure in terms of human and technical resources to support the Polish authorities’ position that the supply in question should attract Polish VAT.

The ECJ also held, whilst noting that this test was ultimately a question for the relevant domestic court to determine, that:

  • the July 2011 Council Implementing Regulation, which introduced the test for a “fixed establishment”, could be of relevance even though not in force at the time of the disputed supplies
  • for VAT place of supply purposes it is necessary to view reciprocal supplies as distinct from each other (even if, together, they form an economic whole).

To view the decision, click here.