CJEU rules on the concept of a VAT fixed establishment

Suitable structure in terms of human and technical resources

The dispute focused on the question to know if Cabot Switzerland GmbH, a Swiss company, had a fixed establishment in Belgium through Cabot Plastics Belgium.

Cabot Switzerland GmbH and Cabot Plastics Belgium, both part of the Cabot Group, had entered into a toll manufacturing agreement whereby Cabot Plastics Belgium used its own resources and staff to transform raw materials, belonging to Cabot Switzerland GmbH, into finished plastic products. The logistic support services were also carried out exclusively for Cabot Switzerland GmbH.

In this framework, Cabot Belgium invoiced its services to the Swiss Principal without Belgian VAT based on the general VAT positioning rules for services (place where the recipient of the service is established). The Belgian VAT Administration, however, argued that Belgian VAT was due on the supplies made by Cabot Plastics Belgium, claiming that Cabot Switzerland GmbH had a fixed establishment in Belgium through Cabot Belgium and is therefore the actual recipient of these services.

CJEU finally clarifies the concept of fixed establishment

The Court takes the view that a VAT taxable person established outside the EU does not have a fixed establishment in another country if it does not have its own permanent suitable structure in that country in terms of staff and technical resources. In this respect, a toll manufacturer acting as a separate legal entity does not constitute a fixed establishment for the principal where it acts for its own account and risk and remains responsible for the staff and resources it uses. This applies even if the services are provided exclusively together with other ancillary or complementary services.

This case was long awaited and finally brings clarity to the concept of fixed establishment for VAT purposes, in the framework of a cross border toll manufacturing scheme.