Embed Size (px)
DESCRIPTION
Indirect Tax Update for week ending 17 October 2014
Citation preview
Indirect Tax Update for week ending 17 October 2014
The Court of Justice has caused another stir this week with its judgment in the Polish case of Welmory (Case C-605/12). The VAT 'place of supply' rules are needed to ensure that there is only a single place where any particular supply takes place. Ordinarily, as far as services are concerned, this is where the supplier or the customer has established its business but, in some cases, it is where a fixed establishment is located.
Under the normal place of supply rules, a supply of services between two business customers takes place in the Member State where the customer has established his business. However, there is an exception to that rule if the service is supplied to a fixed establishment which is in a different place to the place where he has established his business. This concept of a 'fixed establishment' is defined in EU regulations as 'any establishment, other than the place of establishment of a business 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'.
In the Welmory case, a Cypriot company organised online auctions of goods on behalf of a Polish company and received services (such as advertising and data processing etc) from the Polish company. The Polish company took the view that, under the basic rule, the place of supply of its services was where the Cypriot customer had established his business. However, the Polish tax authority took the view that, in the circumstances, the services were actually provided to a fixed establishment of the Cypriot company in Poland. As a consequence, according to the Polish tax authority, the supply of services in question should have been subject to Polish VAT.
The Court of Justice has ruled that it is for the national court to decide on the facts whether, in the circumstances, the Cypriot company has a fixed establishment in Poland. In making that decision, the national court must consider whether that establishment is characterised by a sufficient degree of permanence and a suitable structure in terms of human and technical resources. In other words, the concept of a 'fixed establishment' as defined in the regulations is clear and it is for the national tax courts to determine the facts in each particular case.
Comment – the issue of 'place of supply' is, in most cases, a fairly simple question to resolve but, as this case illustrates, the waters can become a little muddy. Member States are always eager to tax supplies that are regarded as taking place in their jurisdiction and will often suggest that a 'fixed establishment' exists in their jurisdiction in order to justify their case. Businesses need to consider whether technical and human resources exist in a Member State which enable it to receive services supplied by another business. If they do, then it is possible for a 'fixed establishment' to be created in that Member State and, as a result, for services supplied to it, to be regarded as supplied in that Member state.
For further information in relation to any of the issues highlighted in this Indirect Tax Update please contact:
London/South East Karen Robb [email protected]
The Regions Stuart Brodie [email protected]
The Midlands Mike Sheppard [email protected]
© 2014 Grant Thornton UK LLP All rights reserved ‘Grant Thornton’ means Grant Thornton UK LLP, a limited liability partnership Grant Thornton UK LLP is a member firm of Grant Thornton International Ltd (GTIL). GTIL and the member firms are not a worldwide partnership. Services are delivered by the member firms. GTIL and its member firms are not agents of, and do not obligate, one another and are not liable for one another's acts or omissions. This publication has been prepared only as a guide. No responsibility can be accepted by us for loss occasioned to any person acting or refraining from acting as a result of any material in this publication.
www.grant-thornton.co.uk
Indirect Tax Update 38/2014
