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Establishing Establishment for Value Added Tax

The Advocate General has opined on the meaning of ‘establishment’ for a case before the European Court of Justice (ECJ).

The Appellant is a haulage company registered for tax in Luxembourg. The company filed for refunds of VAT incurred in Germany on purchases of fuel and provided the German Tax Authorities with a registration certificate issued by Luxembourg.

Germany rejected the applications on the grounds that the company’s place of business was in Switzerland not Luxembourg. Under German law, refunds of VAT incurred on petrol are available to EU taxable persons. Since Switzerland is not an EU Member State companies established in Switzerland would not be eligible for the VAT refunds.

Two questions were referred to the ECJ by the German Finance Court:

1. Does a certificate such as the one issued by Luxembourg have binding effect or create an irrefutable assumption that the undertaking is established in the State issuing the certificate?
   
   If the answer to this question is no then:
   
   
2. Should the term ‘business’ in Article 1 (1) of the Thirteenth Directive be construed to mean the place where the company has its registered office or where the management decisions are taken or where decisions vital to normal everyday operations are taken?

The Advocate General recommended that the ECJ answer no to the first question. The certificate only proved that the person was registered for tax but not necessarily that they were established in that State.

With regard to the second question, the seat of economic activity “is the place where the taxable person actually carries out its economic activity and which is characterized by the interaction of both human and technical resources sufficient for the provision of this activity. Unless the contrary is proved, this place is deemed to be the registered office of the company.”  

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