The preferred treatment of the fixed establishment in European VAT

Abstract

The fixed establishment concept is highly important in supplies of services in European VAT as it determines the country of taxation and applicability of reverse charge. Irrespective of its relevance, the concept itself lacks clarity. Because of this, on the one hand, in many Member States it is vaguely applied in practice. On the other hand, the lack of clarity allows the concept to be misused in seeking various tax benefits. In the light of this, the purpose of this paper is twofold: first, to discuss the preferred treatment of the fixed establishment stemming from the interpretation of the current legislative provisions and practice of the Court of Justice of the European Union, and second, to briefly touch upon the measures for mitigation of the negative effects relating to misuse of the fixed establishment concept.