In a decision of 18 October 2016, the Ghent Court of Appeal (Hof van Beroep Gent) decided on the existence of a fixed establishment for VAT purposes. Details of the case are summarized below.
(a) Facts. The business of a Dutch company was the collecting and transport of plants from growers to mainly Belgian florists. It operated in Belgium via a location in the Gent area (Lochristi). The Dutch company was of the opinion that the Belgian location was not a fixed establishment for VAT purposes and, accordingly, applied the reverse charge mechanism on its invoices. It thereby avoided the pre-financing of the VAT due.
The Belgian tax administration performed an audit at the end of 2012 for the period between 1 January 2009 and 31 August 2012. It concluded that the Dutch company had a Belgian fixed establishment at its disposal and assessed the company accordingly (813,440 EUR VAT and a penalty of 126,680 EUR).
(b) Issue. Whether or not the Dutch company had a fixed establishment for VAT purposes at its disposal in Belgium?
(c) Decision. The Ghent Court Appeal begins by citing several ECJ judgments, stating that a fixed establishment is present if the established has a certain degree of permanency, because it sustainable has personnel and technical means at its disposal required for the services rendered (ECJ 17 July 1997, C-19/95, ARO-Lease; ECJ 20 February 1997, C-260/95, DFDS A/SDFDS and ECJ 4 July 1985, C-168/84, Gunter Berkholz).
After having analysed the facts, the court ruled in favour of the tax authorities because:
- the Dutch company had a warehouse, offices with computers, meeting rooms, a canteen and a kitchen at its disposal at the location;
- the Dutch company had a dispatchers working at the location;
- the Dutch company mentioned the address of the location on the headings of its invoices;
- the Dutch company mentions the location as an establishment for the transport for Belgian growers and as a cross-docking centre on its website;
- the Dutch company did not enter into any written agreements and
- the customers call directly to the dispatcher in the Belgian establishment.
The economic reality is that the dispatcher took the order from the customer and decides on the route and execution of the transport. It does, according to the court, not matter whether the dispatcher acted as an employee or an agent.
Note that VAT has its own definition of a fixed establishment, which is independent of the OECD direct tax definition (ECJ 23 March 2006, C-210/04 FCE Bank).