The European Court of Justice (ECJ) has made a significant ruling regarding the VAT (Value Added Tax) implications for companies that utilize resources from independent entities within the same group but in different countries. In a case involving a Belgian company providing toll manufacturing services to a Swiss company within the same group, the court concluded that the Belgian company does not have a fixed establishment for VAT purposes in Switzerland.
According to the ECJ, for a fixed establishment to exist, there must be a permanent and adequate structure in terms of personnel and technical resources. The mere fact that two companies belong to the same group does not automatically create a fixed establishment. This ruling has far-reaching implications for the taxation of toll manufacturing services and the obligation to use the National e-Invoice System in Poland from July 2024.
The case brought before the ECJ involved a Belgian company that provided toll manufacturing services to a Swiss company within the same group. The Belgian company used resources from the Swiss company to carry out its manufacturing activities. The question at hand was whether the Belgian company should be considered to have a fixed establishment in Switzerland for VAT purposes.
The ECJ’s ruling clarified that a fixed establishment can only be deemed to exist when there is a permanent and adequate structure in terms of personnel and technical resources. The court emphasized that the fact that the two companies belong to the same group does not automatically create a fixed establishment. In this case, the resources used by the Belgian company were provided by an independent entity within the same group, and therefore, the Belgian company did not have a fixed establishment in Switzerland.
The implications of this ruling are significant, particularly for companies engaged in toll manufacturing services. Toll manufacturing refers to a situation where one company carries out manufacturing activities on behalf of another company, using the latter’s resources. In such cases, the question of whether a fixed establishment exists in the country where the resources are located becomes crucial for VAT purposes.
The ruling also has implications for Poland’s National e-Invoice System, which is set to become mandatory from July 2024. The system requires businesses to use electronic invoices for all transactions. However, the ECJ’s ruling suggests that companies using resources from independent entities within the same group in different countries may not be considered to have a fixed establishment in those countries. This raises questions about the applicability of the National e-Invoice System to such companies.
In conclusion, the ECJ’s ruling clarifies that the mere fact that two companies belong to the same group does not automatically create a fixed establishment for VAT purposes. A fixed establishment can only be deemed to exist when there is a permanent and adequate structure in terms of personnel and technical resources. This ruling has significant implications for the taxation of toll manufacturing services and raises questions about the applicability of Poland’s National e-Invoice System to companies using resources from independent entities within the same group in different countries. It is important for businesses engaged in such activities to review their VAT obligations and seek appropriate advice to ensure compliance with the new ruling.
