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A recent ECJ case may cause significant EU VAT issues for customers making use of a supplier's infrastructure.

Further to our news article of 4 June 2014, the ECJ has followed the Advocate General's opinion. The ECJ judgment held that the recipient of a supply should be treated as having a fixed establishment for VAT purposes in the supplier's Member State, if that establishment has a sufficient degree of permanence and human and technical resources to enable it to receive and use the services for its economic activities.

The ECJ judgment therefore widens the interpretation of what constitutes a fixed establishment.
The decision could have a significant impact where the business is involved in cross-border supplies of services and uses a supplier's infrastructure to make those supplies.

As a reminder, the case of Welmory Sp. z o.o. ( a Polish referral), concerned the place of supply of B2B 'general rule' services supplied by a company established in one EU Member State to a company established in another EU Member State; in particular, where the customer conducted its business activities using the supplier's infrastructure.

Specifically, the issue was whether the customer is deemed to have a fixed establishment in the supplier's EU Member State in accordance with Article 44 of the EU VAT Directive (2006/112/EC), by virtue of using the supplier's infrastructure.

It is, in the opinion of the Advocate General and ECJ, for the national courts to determine if a company has a fixed establishment (i.e. to have a sufficient degree of permanence and human and technical resources to allow it to receive and use the services for the purpose of its economic activities), even if the resources being used do not belong to it.

Where it does, the supplier would be required to account for local VAT on its supply. This could give rise to significant VAT issues (i.e. potentially receive/account for local EU VAT charges, obligation to register for VAT in the local EU jurisdiction by making supplies from the fixed establishment there etc.).

Businesses may wish to review their own position in EU Member States in which they are not established for VAT purposes but who currently use a supplier's infrastructure, or have a supply chain which relies on the services of businesses in other EU Member State jurisdictions.

Who is potentially affected?

  • Businesses that make supplies of services which involve the utilisation of the assets, or other resources of an associated company, or third party entity, which is located in another EU Member State (for example, companies using local assets and resources to fulfil customer contracts, businesses using local infrastructure to provide repair/maintenance services, any contractual arrangement where the delivery of the service is wholly reliant on infrastructure owned by a local business); and
  • Businesses in the UK allowing customers in other EU Member States to use their infrastructure.

How can VAT Services (Scotland) Ltd help you?

  • Review the business' contracts with EU business suppliers and determine if there is a risk of having a fixed establishment in the supplier's local EU Member State since it is not necessary for a business to have its own human and technical resources, but where the business could be viewed as being able to receive and use the services for its economic activity;
  • Similarly, for contracts with EU customers should they be deemed to have a UK fixed establishment and the services are then subject to UK VAT.

Contact us

Should you wish further information on the above, please do not hesitate to contact Gary using the details outlined below.


Gary Moore
Direct line 0141 636 9353
Mobile 07812 061 582
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