The place where the business of a taxable person is established and a fixed establishment in the light of refund of foreign VAT

One of the conditions allowing VAT payers (other than natural persons) to claim a refund of value added tax paid in the price of goods or services purchased abroad is the absence in the Member State of refund of the place where the business of a taxable person is established and a fixed establishment from which the business transactions were made. What is important, this condition must be satisfied in the period for which the taxable person claims a refund of VAT.

The provisions of Council Directive 2008/9/EC do not define the above concepts. The provisions of Council Regulation 282/2011 laying down implementing measures for Directive 2006/112/EC on the common system of value added tax may be helpful in understanding these concepts. Although these definitions are provided for the purpose of Articles 44 and 45 of Directive 2006/112/EC, respectively, they are also relevant for determining the conditions of refund of value added tax from other Member States.

Pursuant to the provisions of the above-mentioned Regulation, the place where the business of a taxable person is established is the place where the functions of the business’s central administration are carried out. Account is to be taken of the place where essential decisions concerning the general management of the business are taken, the place where the registered office of the business is located and the place where management meets. However, in the event of any doubt as regards determining the place where the business of a taxable person is established, the place where essential decisions concerning the general management of the business are taken takes precedence. At the same time, the EU legislature indicates that a postal address may not be considered as the place of establishment of a business of a taxable person.

However, what arouses greater interpretation problems is the concept of a fixed establishment. Pursuant to the provisions of the Regulation, the fixed establishment is any establishment, other than the above-mentioned 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 (from the perspective of the buyer) or to provide the services which it supplies (from the perspective of the service provider).

What is emphasised at the same time is that the fact of having a VAT identification number does not suffice to consider that a taxable person has a fixed establishment.

The concept of a fixed establishment of a taxable person raises many doubts of interpretation both at national level (case-law of administrative courts) and at EU law level (case-law of the CJEU).

Therefore, before claiming a refund of VAT from another Member State, the conditions regarding the corporate and business circumstances of the taxable person concerned should be carefully analysed.