Permanent place of business for value added tax

The determination of the place of supply of services in value added tax makes it possible to correctly determine the place where the tax obligation arises.

Directive 2006/112 EC Council 28 November 2006 on the common system of value added tax[1] First, indicates that the place of supply of services is the place of establishment or permanent establishment.

On the other hand, where the place of establishment or permanent establishment cannot be determined, the place of supply of services shall be the place of normal residence or residence[2]. The purpose of this Article is to show the definition of a permanent place of business and the problems associated with the term.

1. Regulations prior to the implementation of Council Implementing Regulation (EU) Regulation (EU) 282/2011 to 15 March 2011[3]

For a long time there was no definition of the term fixed place of business. Time and Time first the Court of Justice in its judgment of 1985[4] It states that the place where the taxable person has both the personnel and the technical facilities necessary for the provision of services can be considered as a permanent place of business.

It was a landmark sentence, because for the time being first The issue of a permanent place of business was raised, but the information contained in it was laconic. Another ruling of the Court of Justice concerning the permanent establishment of the business was a judgment of 20 February 1997[5].

It is important because it can be concluded that having a permanent place of business does not necessarily have to be related to a property element. It is not necessary to have own staff or technical facilities. The taxpayer can obtain the necessary structure with sufficient durability by concluding contracts with other entities (e.g.

rent, lease, storage). This ruling is also valid because, in addition to the personal-technical premises, the conditions of necessity for the provision of services, it also indicates the condition of constancy for the provision of services from this place.

Based on these two judgments can be found to be of decisive importance as regards the correct determination of the permanent place of establishment of the place of business, as regards the sufficient degree of durability of that place. This view is supported by the content of the Court’s judgment in 17 July 1997[6].

It was pointed out that if a leasing company does not have an organisational structure in a Member State of sufficient durability to enable it to draw up contracts or to take management decisions that allow it to provide services independently, it cannot be assumed that it has a permanent place of business.

However, that ruling is contrary to the judgment of 20 February 1997, because it states that the taxpayer does not need to have its own physical and personal structure in order to recognise that it has a permanent place of business.

However, in the judgment of 17 July 1997 it has been identified as a condition for its own staff, and contrario's use of its contractors' staff does not constitute a condition for having personnel and technical facilities.

Also judgment of 7 May 1998[7] points out that the mere hiring or leasing of vehicles to customers established in a Member State other than that of the company is insufficient to consider that the taxable person has a permanent place of business.

On the basis of the judgments cited above, the conditions which allow to correctly determine the permanent place of business can be distinguished. After first, it is indicated that this place must have personnel and technical facilities. After second, a physical and personal structure must be necessary to provide services from this place. After third, the place must have an adequate level of stability.

However, there are also some discrepancies in the case law presented. In one It was pointed out from the judgments that the taxpayer does not have to have its own personal and technical facilities, it may be sufficient to use the physical and personal structure of its contractors or external companies.

In another judgment, however, the Court of Justice draws attention to the element of ownership in the provision of personnel and technical facilities. It is also imprecise that sufficient stability of the permanent place of business is required.

In the judgment of 17 July 1997 The Court of Justice has indicated that acts to enable contracts to be drawn up or management decisions may show sufficient durability of the permanent place, but this is only an example.

2. Post-introduction adjustment Regulation (EU) 282/2011

A legal act that indicates the permanent place of business as the place of supply of services is Directive 2006/112. However, this document does not contain a definition of that term. Therefore, the Court of Justice’s established case law in this respect provided the basis for the proper definition of that term by both taxpayers and tax authorities.

Another judgment in which the Court of Justice referred to the permanent place of establishment was the judgment with 28 June 20078.

In the case of a taxable person providing transport services of whether or not he has a fixed place of business, the taxable person may provide for the provision by the taxable person of a space in which contracts may be drawn up and normal management operations taken, as well as a place of rest of vehicles used to carry out the activity.

It is worth considering at this point what should be understood by ordinary management. The doctrine assumes that activities of the ordinary board of directors are those involving the handling of current cases related to the ordinary operation of things and maintaining them in a state which is uncompromised in its current purpose.[9].

Also the filing of a claim for property protection, possession, eviction, conclusion of contracts related to management and operation, is within the time limits of ordinary board activities[10].

The definition of the term fixed place of business has been introduced Regulation (EU) 282/2011. According to this act, a permanent place of business should be understood as any place other than the place of business, characterised by sufficient stability, adequate personnel and technical facilities for the reception and use of services provided for its own permanent place of business.[11].

This definition is a synthesis of the judgments of the Court of Justice relating to the term of permanent establishment. Despite the existing definition of the term and many rulings in this regard, it is still difficult to correctly define the permanent place of business.

This problem is due to indeterminate phrases in the definition of a fixed place term.

The question arises as to what is meant by the term "sufficient stability", what size should the personnel and technical facilities have, whether the physical and personal structure must be the property of the taxpayer, or whether it is sufficient to use the personnel of its contractors.

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 28 June 2007[12] 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 of the business, did not constitute sufficient stability.

Also the decision with 25 October 2012[13] 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[14].

The Court pointed out that one from companies for a permanent place of business, it must be characterised by adequate stability and personnel-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 resources and forces at the place in question should be made in relation to specific services. The forces and resources are to be adequate to enable either the reception and use of the services purchased or the provision of services[15].

Chief Administrative Court In one of his judgments[16] has indicated that the permanent place of business must have sufficient stability, adequate personnel and technical facilities and must be 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 facilities, is unable to consume the services purchased, it cannot be considered as a permanent place of business[17].

The Supreme Administrative Court also indicated that both the personal and technical resources used by a potential permanent place of business need not constitute the property of the taxpayer[18]. The taxpayer may have a physical-personal structure created by leases, leases or other similar forms.

Also in the NSA judgment of 15 June 2015[19] it was pointed out that the taxable person does not need to have at his place the staff who are employed by him and 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. 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 decisions were made in the judgment of the Provincial Administrative Court in Warsaw with 25 February 2015[20].

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.

3. Summary

Despite the introduction of a definition of the term permanent place of business, the Court of Justice’s jurisprudence has, to a large extent, drawn up an interpretation of the term. After first, it is indicated that the site must be sufficiently stable and therefore the temporary or periodic action does not fit In the first Consignments.

Subsidiary, preparatory activities, such as technical studies or 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 suitable to receive and use for its own service needs or to provide services.

Technological development, new forms of cooperation between entrepreneurs and, above all, the multiplicity of facts make it necessary for the taxpayer to be assessed on an individual case, as the Court of Justice rightly pointed out.

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1 Directive 2006/112 EC Council 28 November 2006 on the common system of value added tax, OJ L 347/1, Next: Directive 2006/112. [2] Article 43 Directive 2006/112.

3 Council Implementing Regulation (EU) Regulation (EU) 282/2011 to 15 March 2011 laying down implementing measures Directive 2006/112 on the common system of value added tax; hereinafter: Regulation (EU) 282/2011.

4 Judgment of the Court of Justice 4 July 1985, Gunter Berkholz v Finanz-amt Hamburg-Mitte-Altstadt, C-168/84, hereinafter: judgment of the Court of Justice of 1985 5 Judgment of the Court of Justice 20 February 1997, Commissioners of Customs and Excise v DFDS A/S, C-260/95.

6 Judgment of the Court of Justice 17 July 1997, ARO Lease BV v Inspector van de Belastingdienst Grote Ondernemingen te Amsterdam, C-190/95. 7 Judgment of the Court of Justice 7 May 1998, Lease Plan Luxembourg SA v Belgian State, C-390/96.

8 Judgment of the Court of Justice of 28 June 2007, Planzer Luxembourg Sarl v Bundeszentralamt für Steuern, C-73/06. 9 J. Ignatovich, Law of Matter, op. cit. 10 S. Rudnicki, Commentary on Civil Code. Book second. Property and other rights in kind, LexisNexis, Warsaw 2006. [11] Article 11 Regulation (EU) 282/2011.

12 Judgment of the Court of Justice of 28 June 2007, Planzer Luxembourg... op. cit. 13 Judgment of the Court of Justice of 25 October 2012, Daimler AG and Widex A/S v Skatteverket, C-318/11 and C-319/11. 14 Judgment of the Court of Justice of 16 October 2014, Welmory sp. z o.o. v. Director of the Tax Chamber in Gdańsk, C-605/12. 15 A.

Bartosiewicz, R. Kubacki, VAT. Comment, Comment to Article 28(b) Goods and Services Tax Act, Lex 117879. 16 NSA judgment of 22 November 2018, reference no. I FSK 1460/16. [17] Ibid. 18 NSA judgment of 16 February 2015 reference no. I FSK 2004/13. 19 NSA judgment of 15 June 2015, reference no. III SA/Wa 3332/14. 20 reference no.

III SA/Wa 3741/14.