No VAT fixed establishment without staff

The judgment of the Court of Justice in Case C-931/19

Prepared by Davide Accorsi and Giorgio Beretta

A fixed establishment for VAT purposes must have a structure endowed with both human and technical resources. This is, in a nutshell, the conclusion reached by the Court of Justice of the European Union (CJEU) in its decision in Case C-931/19 (Titanium) of 3 June 2021.

Recalling its settled case-law on this matter (reference was made, in particular, to the CJEU’s decision in Case C-190/95, Aro Lease) and the definition of “fixed establishment” laid down, more recently, in Article 11 of Implementing Regulation no. 282/2011, the CJEU held that “the concept of ‘fixed establishment’ … requires a sufficient degree of permanence and a structure adequate, in terms of human and technical resources, to supply the services in question on an independent basis”. According to the EU judges, it follows that “a structure without its own staff cannot fall within the scope of the concept of a ‘fixed establishment’” (paragraph 42 of the decision at comment).

The CJEU puts an end to proceedings concerning a company (Titanium), with its legal seat and direction in Jersey, which leased an immovable property owned in Vienna to two Austrian traders, the transaction being subject to VAT. Not having any personnel in Austria, Titanium entrusted an Austrian company with the day-to-day management of the leased property. However, Titanium retained the decision-making power to determine the economic and legal conditions relating to the leased property management.

At the core of the reference for a preliminary ruling whether the leased property constituted a fixed establishment for VAT purposes in Austria of the non-resident company. In particular, the Austrian tax court asked whether, to have a fixed establishment for VAT purposes, the joint presence of human and technical resources is always needed, or whether, in the specific case of a taxable lease of immovable property, which constitutes only a passive activity requiring tolerance of an act or situation, that property, even without human resources, can be regarded as a fixed establishment.

This doubt arose because the Austrian tax administration’s practice provides that, in the case of the letting of immovable property in Austria, the lessor must be considered as a taxable person established therein. In addition, the Austrian court recalled some rulings of German tax courts, where it was held that, since no human resources are required, a permanent structure such as a wind farm could be considered, by itself, a fixed establishment for VAT purposes. In light of these elements, although the definition of fixed establishment expressly requires the simultaneous presence of human and technical resources, it could therefore be controversial whether the possession of personnel is always needed, even in the context of a passive activity such as the lease of immovable property.

The CJEU’s reply on this point is unequivocal: “a property which does not have any human resource enabling it to act independently clearly does not satisfy the criteria established by the case-law to be characterised as a fixed establishment”. The EU judges point out that the Jersey-based company “does not have any staff of its own in Austria and that the persons responsible for certain management tasks were contractually appointed by that company, which reserved for itself all important decisions concerning the letting of the property in question” (paragraphs 44 and 45 of the decision at comment).

Despite rather unequivocal, the CJEU’s findings leave room for some interpretative doubts on the concept of fixed establishment. In particular, it may be questioned whether the CJEU’s reference to the possession of “own staff” by the taxable person can lead to a fixed establishment being considered existent in case human resources are provided by a person other than the service provider, in particular where the non-resident provider actually controls such personnel.

Let’s Talk

For a deeper discussion, please contact:

Luca Lavazza

PwC TLS Avvocati e Commercialisti


Davide Accorsi

PwC TLS Avvocati e Commercialisti