Advocate-General – Using supplier’s infrastructure may lead to a fixed establishment for VAT purposes

The Advocate General (AG) released her opinion in the interesting VAT case dealing with the situation whether a foreign company can be regarded as having a fixed establishment in the supplier’s Member State by using the supplier’s infrastructure.


A Polish company, Welmory Sp.z.o.o (Welmory PL), entered into a cooperation agreement with an associated Cypriot company (Welmory Limited, Welmory CY). The Cypriot company maintained Welmory PL’s Polish website via which Welmory PL organized online auctions of goods for its own account to final customers. In order for the customers to bid in the auctions, they had to be in possession of bidding rights which they purchased from Welmory CY.

Welmory CY used the employees and technical resources of Welmory PL to provide website support services. The Polish company billed Welmory CY without VAT for the use of its resources, as it considered its supplies to be subject to the general B2B place of supply rule. Under this rule, a service is taxable where the recipient is established (Art. 44, EU VAT directive).

However, the Polish tax authorities maintained that these services were subject to Polish VAT on the basis that Welmory CY, through its reliance on the infrastructure of Welmory PL, had a fixed establishment in Poland.

Opinion of the AG

The AG states that the national court should determine whether a company has a fixed establishment considering the facts of the case. According to the AG, a fixed establishment is characterised by a sufficient degree of permanence and a suitable structure in terms of human and technical resources to enable it to receive and use the services supplied to it for its own needs. The AG also maintains that own human and technical resources are not necessary if there is availability of other external resources in the same way as if they were those of the establishment itself.

Another interesting point of the AG’s opinion is whether the consideration paid by Welmory CY for the services supplied to it can be deemed to be partial consideration for the supply of goods by Welmory PL to the customers. According to the AG if there is a direct link between the supply of goods by Welmory PL to the bidders on the website and the consideration by the Cypriot company to Welmory PL for the services, the payments for such services could be seen as third party consideration for the goods. Therefore, the taxable amount for Welmory PL will be the value of the goods sold on the website and the payment received from Welmory CY. This part of the opinion is not entirely clear, therefore it will be interesting to see the Court’s decision on this point.

What does it mean for you?

The Polish tax authorities’ position maintains the emerging trend of the recent years, whereby they apply a wide interpretation of fixed establishments in Poland. Interestingly, the AG`s opinion supports this by significantly extending the definition of a VAT fixed establishment. The opinion suggests that:

  • if the human and technical resources are owned by a company in a Member State (A) and
  • these are available to a company established in another Member State (B) with the purpose of supplies of services and it can control these, as if it were its own resources,
  • then the latter company can be deemed to have a fixed establishment in Member State A.

If the CJEU follows the opinion of the AG, the impact of the judgment will be significant and will affect a number of international companies. If this interpretation is endorsed, it will impact all multinational businesses in various industry sectors, which provide services using the resources of a group company or even of an independent third party.

We strongly recommend that those businesses that may be affected should consider their position in anticipation of the Court’s judgment.