The VAT permanent establishment replacing the parent company is admitted

A company that is dependent but autonomous from a legal point of view cannot be considered at the same time as a permanent establishment of another company in the group. Article 44 of the VAT directive refers in fact to a taxable person who has established the headquarters of his economic activity in one place and has a stable organization in another.

However, two companies in a group - as in the present case - do not constitute one taxable person, but rather two. Only Article 11 of the VAT Directive allows Member States, in certain circumstances, to 'regard as a single taxable person' (so-called 'VAT group') several taxable persons who are closely linked. However, this possibility is limited to the territory of the Member State concerned ('persons established in the territory of the same Member State'). Even the additional substantive criteria set out in Article 44 of the VAT Directive, specified in more detail in Article 11(1) of the Implementing Regulation, do not allow the conclusion that the corporate link with another taxable person would facilitate the existence of a permanent establishment. organization.

Therefore, the mere fact that a company from another Member State and a company in the national territory are part of the same group does not allow the conclusion of the existence in the national territory of a permanent establishment within the meaning of Article 44, second sentence, of the VAT Directive. The existence of a stable organization requires the satisfaction of other criteria.

According to the AG, this conclusion is not even affected by the Court's decision in the DFDS case (C-260/95). It is true that it could be interpreted in the sense that it would allow a subsidiary company to constitute a stable organization of the parent company, in the capacity of a simple auxiliary of the latter. However, this decision concerned the specific sector of tourist travel organisers, who are in any case subject to a special VAT regime (currently Articles 306 et seq. of the VAT Directive). For this reason alone, the pronunciation of the story is not automatically applicable to other situations.

Furthermore, the DFDS decision was driven by the question of who had provided (and not who had received) the travel services on an economic basis.

Finally, the Court had already distanced itself from the DFDS decision and had clarified that even a 100% controlled company constitutes a legally autonomous person subject to tax (Daimler, C-318/11 and C-319/11). Unfortunately, however, the Court held, in the Dong Yang case (C-547/18) that it could not be 'excluded that the subsidiary company held for the exercise of such an activity by the parent company (...) could constitute a permanent establishment organization of that parent company, in a Member State of the Union, pursuant to Article 44 (…)". However, this statement is at least ambiguous and prejudicial to the necessary legal certainty when determining the place of provision of services. Furthermore, it is not in any case transposable to simple group companies. Probably for this reason, the Court, in the last two relevant decisions, has expressly stated that the qualification of "permanent organisation", which must be assessed in light of the economic and commercial reality, cannot depend solely on the legal status of the entity of which in question, and that the fact that a company has a subsidiary in a Member State does not in itself mean that it also has its own permanent establishment there (Cabot Plastics Belgium, C‑232/22; Berlin Chemie A. Menarini, C‑ 333/20).

The latter statement also appears in a case which concerned only one group company (Cabot Plastics Belgium, C‑232/22), so the statement can probably also be extended to group companies.

Finally, the Court declared, in the Welmory case (C‑605/12), that the location of the economic activity as a connection point constitutes an objective, simple and practical criterion that offers great legal certainty, being easier to verify than to the existence, for example, of a stable organization. Already in his conclusions the AG, in the Welmory case (C-605/12), had underlined the fundamental importance of legal certainty, as far as the provider is concerned, in determining his tax obligations: an autonomous legal person cannot be at the same time the permanent establishment of another legal person.

At the same time, a permanent establishment exists for the AG only if the latter replaces the parent company located in another Member State. In fact, a contract with a service provider can establish a permanent establishment only if it does not refer solely to the provision of services relating to goods of the recipient of the services themselves.

Rather, it must be understood as the transfer of the necessary personnel and/or the transfer of the technical means necessary for the recipient of the services to be able to provide the same or make similar transfers on site as from a parent company (Adient, C-533/22).