The correct definition of the place of supply of services in value added tax is important because it allows to correctly determine the place where the tax obligation arises. Unfortunately, legislation and jurisprudence leave much confusion in this regard.
Technological development, new forms of cooperation between entrepreneurs, and, above all, the multiplicity of facts, means that whether a taxpayer has a permanent place of business should be assessed on an individual case, as the Court of Justice rightly pointed out. It is worth knowing the approach of the authorities to a rather vague definition of a permanent place of business.
Definition of time limit and approach of the Court
The definition of the term fixed place of business was introduced by the Regulation with 15 March 2011 1 .
According to that act, any place other than the place of establishment with sufficient stability, adequate personnel and technical facilities for the reception and use of services provided for its own permanent establishment should be understood as a permanent place of business. 2 .
This definition is a synthesis of the judgments of the Court of Justice relating to the time limit for the permanent establishment of the business (among other things, the judgments of the Constitutional Tribunal of dated 20 February 1997 3, dated 17 July 1997 4 . whether the sentence dated 7 May 1998 5 ).
The doctrine indicates that the assessment of whether the taxpayer has adequate means and forces at a given location should be made in relation to specific services. The forces and means are to be adequate to enable either the reception and use of the services purchased or the provision of services
According to the Court’s case law, first, it is indicated that the place of business must be sufficiently stable and therefore the temporary or interim measures do not fit In the first Consignments. Subsidiary, preparatory activities such as technical studies, quality tests demonstrate periodic activity.
After second, the place must have the necessary personnel and technical facilities. The size of the physical-personal structure should be assessed from the point of view of the type of activity carried out. It should be stressed that it is not necessary for the taxpayer to employ his own employees and to use his own technical facilities.
It may be sufficient to use the structure of external entities in kind under lease agreements. After third, the place must be appropriate to receive and use for its own service needs or to provide services.
Despite the existing definition of the term and numerous judgments in this respect, the correct definition of a permanent place of business remains difficult. Problems are the vague wording of the definition of the fixed-place term.
The question arises as to what is to be understood by the term "sufficient stability", what size should the personnel-technical facilities have, and whether the physical-personal structure must be the property of the taxpayer or whether the use of the personnel of its contractors is sufficient.
New line of caselaw
In its rulings, the Court of Justice indicated that activities of an ancillary or preparatory nature do not mean that the taxable person has a permanent place of business.
In the judgment of the day 28 June 2007 6 The Court pointed out that the equipment used by the entrepreneur for preparatory or auxiliary activities, such as recruitment of workers or the purchase of technical resources necessary for the operation, did not constitute sufficient stability.
Also the decision 7 dated 25 October 2012 points out that the condition of sufficient stability will not be met when the taxable person performs only technical tests or research work excluding taxable transactions. In one of newer decisions, the Court of Justice referred to the close cooperation of related parties 8 .
The Court pointed out that one with the company for its permanent place of business, it must be characterised by adequate stability and personnel and technical facilities enabling it to receive and use services provided by the other company for its own business needs.
The doctrine indicates that the assessment of whether the taxpayer has adequate means and forces at a given location should be made in relation to specific services. The forces and means are to be adequate to enable either the reception and use of the services purchased or the provision of services 9 .
Supreme Administrative Court in judgment dated 22 November 2018 10 points out that the permanent place of business must be sufficiently stable, adequate personnel and technical facilities and capable of receiving and using services provided to it or capable of providing services.
The physical and personal structure must be appropriate to enable the reception and use of services or services to be adequately achieved. Where a given structure, because of its personnel and technical background, is unable to consume the services purchased, it cannot be considered as a permanent place of business.
The Supreme Administrative Court also points out that both personnel and technical resources used in the area of a potential permanent place of business need not be owned by the taxpayer 11 . The taxpayer may have a physical-personal structure created by leases, leases or other similar forms.
In the judgment of the Provincial Administrative Court dated 15 June 2015 12 it was pointed out that the taxable person does not have to have at his place any staff who are employed by him or the technical facilities which he owns.
An own physical and personal structure is not necessary unless the availability of another facility is comparable to the availability of its own facilities. In addition, the use of outsourcing services in certain factual states may be sufficient to consider that the taxpayer has personal and technical facilities.
It is important that the taxpayer exercises control over the physical and personal structure. Similar ruling was made in the judgment of the Provincial Administrative Court in Warsaw dated 25 February 2015 reference no. III SA/Wa 3741/14.
In addition, it was pointed out that the permanent place of business must be sufficiently consistent that it can be concluded that the activity is not temporary or temporary.
Author: Rafał Łomża. Student on the Law of the Catholic University of Lublin John Paul II. Interests in commercial company law, tax law.
1 Council Implementing Regulation (EU) No Regulation (EU) 282/2011 dated 15 March 2011 laying down implementing measures Directive 2006/112 on the common system of value added tax. Quoted further as: Regulation (EU) 282/2011.
2 Article 11 Regulation (EU) 282/2011.
3 Judgment of the Court of Justice dated 20 February 1997 on C-260/95 Commissioners of Customs and Excise v. DFDS A/S.
4 Judgment of the Court of Justice dated 17 July 1997 on C-190/95 ARO Lease BV v. Inspection van de Belastingdienst Grote Ondernemingen te Amsterdam.
5 Judgment of the Court of Justice dated 7 May 1998 on C-390/96 Lease Plan Luxembourg SA v. Belgian State.
6 Judgment of the Court of Justice of the European Union dated 28 June 2007 on C-73/06 Planzer Luxembourg Sarl v. Bundeszentralamt für Steuern.
7 Judgment of the Court of Justice of the European Union dated 25 October 2012 on C-318/11 and C-319/11 Daimler AG and Widex A/S v. Skatteverket.
8 Judgment of the Court of Justice of the European Union dated 16 October 2014 on C-605/12 Welmory sp. z o.o. v. Director of the Tax Chamber in Gdansk.
9 A. Bartosiewicz, R. Kubacki, VAT.Comment, Comment on Article 28(b) the Goods and Services Tax Act.
10 Judgment of the Supreme Administrative Court dated 22 November 2018 reference no. I FSK 1460/16.
11 Judgment of the Supreme Administrative Court dated 16 February 2015 reference no. I FSK 2004/13.
12 Judgment of the Provincial Administrative Court dated 15 June 2015 reference no. III SA/Wa 3332/14.