Link to the European VAT legislation
Sixth VAT Directive – Article 17(3) and (4) – Refund of VAT – Eighth VAT Directive – Refund of VAT to taxable persons not established inside the country – Articles 3(b) and 9, second paragraph – Annex B – Certificate of status as a taxable person – Legal scope – Thirteenth VAT Directive – Refund of VAT to taxable persons not established in Community territory – Article 1(1) – Concept of ‘business’
The referrimg articles are actually referring to VAT refunds via the 8th and 13th VAT Directive, while the case is referring to the concept of Fixed Establisment,
Facts
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The applicant’s directors are two employees of P AG, one of whom lives in Switzerland and the other in Italy.
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At the applicant’s registered office, a certain Henri Deltgen (‘D’) runs the firm of Helvetia House, from which the applicant has rented its business premises. In his capacity as representative of the sole shareholder in the applicant, D arranged for the applicant’s incorporation.
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In April 1997 and May 1998, the applicant applied to the German tax authority for the refund of VAT which it had paid on fuel purchases in Germany. According to that certificate, the applicant is liable to VAT under a Luxembourg identification number.
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Having been informed by the foreign department of its central information office that the applicant did not have any telephone line at the address stated in the certificate, the German tax authority took the view that the applicant had not established that the place of its management was in Luxembourg.
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The applicant lodged objections against the refusal for refund, producing an additional certificate according to which it was ‘a commercial company within the meaning of the German/Luxembourg double taxation agreement’ and was liable to ‘Luxembourg direct taxation’. It argued that its two managers, D and another person also responsible for its administration and accounting, carried on their activities in Luxembourg, that five employees worked part-time as drivers at its registered office, that it had a telephone line, as was apparent from its letter heading, that goods vehicles registered in Luxembourg were used for the transport of air freight, and that invoices were drawn up at its registered office.
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By decisions of 1 July 1999, the German tax authority dismissed those objections on the ground that the place from which the applicant’s business was managed was in Switzerland rather than in Luxembourg.
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The applicant brought an action against those dismissal decisions. By a judgment of 26 October 2001, the Finanzgericht Köln (Cologne Finance Court) upheld that action, taking the view that Luxembourg constituted the main starting-point of the transactions carried out by the applicant vis-à-vis its Swiss parent company, and that the applicant’s registered office was undeniably in Luxembourg.
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By a judgment of 22 May 2003, the Bundesfinanzhof (Federal Finance Court) annulled that judgment on the ground that the Finanzgericht Köln had wrongly assumed, on the basis of the location of its registered office, that the applicant was established in Luxembourg. Taking the view that interpretation of the concepts of establishment and place of business used in German VAT legislation were a matter of Community law, the Bundesfinanzhof identified a series of criteria which, in its view, might be relevant in that respect: identification of the applicant in its own name in the Luxembourg telephone directory; leasing of offices and conclusion of contracts in its own name; place and period of activity of any workers employed in the applicant’s service; the place where invoices relating to its transactions vis-à-vis its parent company were drawn up; place of registration of goods vehicles; place where goods vehicles were parked when not in use; existence of VAT declarations in Luxembourg; issuing by the Luxembourg tax authorities of documents concerning the applicant. It then referred the case back to the Finanzgericht Köln for the latter to make the necessary factual findings.
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In its order for reference, the Finanzgericht Köln states the following in that regard:
1. In the years 1997 and 1998 the claimant, initially on the basis of an agreement on freight charges of 1 January 1996 and on its own letterheading, made out several invoices to P AG for freight charges which the latter then also settled by bank transfer. It also invoiced P AG in parallel for charges for the use of semi-trailers. By 26 December 1995 it had already, through its employee Robert Surber and with effect from 1 January 1996, concluded a written lease with the firm of Helvetia House – Henri Deltgen for office space at Rue de Luxembourg 23 A in Frisange. It also paid the heating costs for the premises. It could be reached on the telephone number for Helvetia House, although it was entered in the telephone book under the name of D, and it also used that number on its letterheading. In the period from 1996 to 1998 it had also registered 7 goods vehicles with the Ministerium für Transportwesen (Ministry of Transport) in its own name and had received a corresponding operating permit from the Luxembourg Ministry for the Middle Classes and Tourism. According to the list of personnel produced by it, on the date of reference of 15 June 1998 it had been employing seven members of staff most of whom had been working for it since 1996 or had otherwise been taken on to replace former members of staff who had also been employed since 1996. The claimant had concluded corresponding written contracts of employment with them. Finally, it was also registered for turnover tax purposes with the Luxembourg tax administration’s Bureau d’Imposition under no. 1995 2408 871 and had the VAT identification number LU 16487850. It also filed turnover tax returns and received turnover tax assessments. It was also registered for direct tax under tax no. 1995/2408/871.
2. The defendant’s enquiries of the Luxembourg tax authority on 11 July 2002 had the following result …: the applicant had leased its premises from Helvetia House and had also had the latter render some secretarial and accounting services on its behalf. The applicant did not have any equipment or other property at the registered office, nor were its officials permanently present in Luxembourg. Nor were there any storage premises or parking spaces for goods vehicles there. However, the lorry drivers were registered in Luxembourg and the goods vehicles were also registered there. In the year 1997 the claimant declared turnover in the sum of EUR 575 129.56 in Luxembourg.
3. In the oral proceedings on 19 January 2006 the Senate also established in this context that both of the applicant’s directors were present in Luxembourg either 2 to 3 days a week (Surber) or 2 to 4 days a month (Gemple). Major management decisions (such as the purchase of goods vehicles, engagement of staff) were taken there and the administration was also located there (bookkeeping, invoicing, pay administration). Operations (arrangements and organisation regarding haulage trips, contact with customers) were nevertheless carried out by P AG from Switzerland. Under those arrangements the claimant rendered the corresponding haulage services using the aforementioned goods vehicles owned by it. Services were supplied 100% to P AG and the claimant accounted to it for the services concerned from Luxembourg.
4. In answer to the question whether the applicant rendered haulage services within the territory of the country (Germany), the applicant produced certification as to the application of the zero-rating rule under the deduction procedure (Paragraph 52(4) UStDV 1993) in relation to both of the credit periods in a letter of 10 January 2006 …’
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Emphasising that the central question in the case before it is whether the applicant in the main proceedings is established outside Community territory, in which case it is not entitled, given the seventh sentence of Paragraph 18(9) of the UStG, to reimbursement of VAT paid on fuel purchases in Germany, the referring court shares the opinion of the Bundesfinanzhof that the concept of establishment for the purposes of that provision must be interpreted in accordance with Article 1(1) of the Thirteenth Directive. However, it has doubts as to how correctly to interpret that latter provision.
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In its view, the first question must be as to the legal scope of the certificate produced by the applicant. Whilst accepting that that certificate provides an irrefutable presumption that the person in question is an operator subject to VAT, it nevertheless asks whether an irrefutable presumption attaches as regards the establishment of that person in the Member State of the administration which issued it (the issuing Member State).
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If that question calls for a negative answer, it asks whether the term ‘business’ within the meaning of Article 1(1) of the Thirteenth Directive refers to the place where the registered office of the company is situated and where essential decisions are taken concerning its economic management (which, in this case, the court sees as being in Luxembourg) or the place from which its operational activities are carried out (which, in this case, the court sees as being in Switzerland).
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In those circumstances, the Finanzgericht Köln decided to stay the proceedings and refer the following questions to the Court of Justice for a preliminary ruling:
‘(1) Does an undertaking’s certificate according to the specimen form in Annex B to the Eighth Directive have binding effect or create an irrefutable assumption that the undertaking is established in the State issuing the certificate?
(2) If the first question should be answered in the negative:
Should the term “business” in Article 1(1) of the Thirteenth Directive be construed as meaning the place where the company has its registered office?
or should it mean the place where management decisions are taken?
or is the crucial factor the place where decisions vital to normal everyday operations are taken?’
Decision
1. Article 3(b) and the second paragraph of Article 9 of the Eighth Council Directive 79/1072/EEC of 6 December 1979 on the harmonisation of the laws of the Member States relating to turnover taxes – Arrangements for the refund of value added tax to taxable persons not established in the territory of the country must be interpreted as meaning that the certificate in accordance with the specimen in Annex B to that directive does in principle allow the presumption that the person concerned is not only subject to VAT in the Member State whose tax authorities issued it, but also that he is established in that Member State.
Those provisions do not, however, imply that the tax authorities of the Member State in which refund of input VAT is applied for are prohibited, where they have doubts as to the economic reality of the establishment whose address is given in that certificate, from verifying that reality by having recourse to the administrative measures made available for that purpose by Community legislation on VAT.
2. Article 1(1) of the Thirteenth Council Directive 86/560/EEC of 17 November 1986 on the harmonisation of the laws of the Member States relating to turnover taxes – Arrangements for the refund of value added tax to taxable persons not established in Community territory must be interpreted as meaning that the place of a company’s business is the place where the essential decisions concerning its general management are taken and where the functions of its central administration are exercised.
Source Curia
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