It is common knowledge that, when they exercise their powers, Member States must observe the general principles of law which form part of the European Union legal order. These principles include, a.o., the principle of legal certainty.
The principle of legal certainty, the corollary of which is the principle of the protection of legitimate expectations, requires, on the one hand, that rules of law must be clear and precise and, on the other, that their application must be foreseeable by those subject to them. This principle is to be observed all the more strictly in the case of rules liable to entail financial consequences, in order that those concerned may know precisely the obligations which such rules impose on them. (Case C‑492/13, Traum, para. 27 – 29)
Now, in the context of the continuous debate about triggering a fixed establishment in one or another situation – it is perhaps good to remember the following:
The CJEU has consistently held that when determining the place of taxation, the seat of economic activity is a “primary reference point”. Another place should be taken into account only if a reference to the seat (principal place of business) does not lead to a rational result. This view has been stated many times, e.g. jjudgments in Case C-168/84 Berkholz (para. 17), Case C-231/94 Faaborg-Gelting Linien (para. 16), Case C-190/95 ARO Lease (para 15) and Case C-390/96 Lease Plan para. 24).
This view was also reiterated in the opinion of the Advocate General to the case of Welmory, C-605/12 (para. 32) and repeated by CJEU in the judgment of this case (para. 53 and 56).
The place where a taxable person has established his business is objective, simple, practical and offers great legal certainty, being easier to verify than, for example the existence of a fixed establishment (para 55). Additionally, as the CJEU rightly pointed out therein: “Furthermore, the place of business is mentioned in the first sentence of Article 44 of the VAT Directive, whereas the fixed establishment is mentioned only in the following sentence. That sentence, introduced by the adverb ‘however’, can only be understood as creating an exception to the general rule set out in the previous sentence.” (para 56).
Reassuringly, the essential principle of legal certainty is stressed, once more, in the recently published opinion of the Advocate General in Case C-547/18 Dong Yang (para. 43 and 44). Looking forward to seeing the CJEU judgment in this landmark case.
Contribution by Maria Cambien
