The European Court of Justice (ECJ) has consistently ruled that a group company does not constitute a VAT fixed establishment of another foreign group company. In the Adient case (C-533/22), the ECJ reaffirmed this position. Key insights from the ruling:
- A toll manufacturer is not a fixed establishment of its principal.
- A fixed establishment requires that the service provider’s resources are controlled by the recipient as their own.
- The same personnel and technical means cannot be used to both provide and receive services.
- Case details:
- Adient Germany engaged Adient Romania as a toll manufacturer for automotive products.
- Adient Germany retained ownership of raw materials and finished products.
- Adient Romania provided manufacturing, assembly, and auxiliary services like stock management and shipping support.
- Romanian tax authorities claimed Adient Romania was a VAT fixed establishment of Adient Germany, implying Romanian VAT should apply.
- ECJ judgment:
- Adient Romania is not a VAT fixed establishment of Adient Germany.
- Adient Romania’s employees and technical means cannot be attributed to Adient Germany.
- A fixed establishment requires the service provider to relinquish control of its resources to the recipient.
- Auxiliary services provided by Adient Romania do not affect the fixed establishment analysis.
- Implications:
- The ruling reinforces that local group companies providing services to foreign group companies do not constitute fixed establishments.
- This decision limits the broad interpretation of ‘VAT fixed establishment’ by some tax authorities.
- It provides certainty for multinationals using toll manufacturers and other corporate structures with auxiliary service providers.
Source: loyensloeff.com
Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.
