© 2025 by Michael Firth KC, Gray's Inn Tax Chambers
Contact: michael.firth@taxbar.com
R3. Services: place of supply
GENERAL
- Strict interpretation does not apply to place of supply rules
"[54] Inasmuch as the portfolio management carried out by Deutsche Bank in the main proceedings is a service of a financial nature and Article 56(1)(e) of Directive 2006/112 is not to be interpreted narrowly (see, to that effect, Case C-327/94 Dudda [1996] ECR I-4595, paragraph 21, and Levob Verzekeringen and OV Bank, paragraph 34 and the case-law cited), that activity must be regarded, as a financial transaction, as falling within the scope of Article 56(1)(e) of Directive 2006/112." (Deutsche Bank AG C-44/11)
"[32] Before addressing the grounds of appeal it is important to recognise, as Mr Milne emphasised, that like the corresponding provision in the Sixth Directive, article 59(c) of the Principal VAT Directive is not an exemption that must be strictly construed." (HMRC v. Gray & Farrar International LLP [2023] EWCA Civ 121, Simler LJ)
- Purpose: to avoid conflicts of jurisdiction and non-taxation
"[30] The object of those provisions determining the point of reference for tax purposes of supplies of services is to avoid, first, conflicts of jurisdiction which may result in double taxation and, second, non-taxation of revenue (judgments of 16 October 2014, Welmory, C‑605/12, EU:C:2014:2298, paragraph 42 and the case-law cited, and of 7 May 2020, Dong Yang Electronics, C‑547/18, EU:C:2020:350, paragraph 25).
[31] By thus determining in a uniform manner the point of reference for tax purposes of supplies of services, those provisions delimit the competences of the Member States and set out a rational delimitation of the respective areas covered by national rules on VAT (see, to that effect, judgment of 16 October 2014, Welmory, C‑605/12, EU:C:2014:2298, paragraphs 50 and 51)." (Climate Corporation Emissions Trading C-641/21)
- Allocation of taxation to place where services are consumed
"[44] Furthermore, it is important to recall that the underlying logic of the provisions relating to the determination of the place of supply of services and which is also reflected in recitals 3 and 4 of Directive 2008/8 and in Article 44 of the VAT Directive, requires taxation to be carried out as far as possible at the place where the services concerned are consumed (see, by analogy, judgment of 8 December 2016, A and B, C‑453/15, EU:C:2016:933, paragraph 25 and the case-law cited)..." (Climate Corporation Emissions Trading C-641/21)
- Fraud by recipient has no effect on place of supply as it is not a right
"[41] However, in the first place, unlike the cases which gave rise to the case-law recalled in paragraph 40, the present case concerns not the reliance on a right, such as the right to an exemption in respect of an intra-Community supply of goods, but the determination of the place of a taxable transaction.
[42] An interpretation according to which, in the case of VAT evasion, the place of supply of services may be deemed to be in a Member State other than that determined under the provisions of the VAT Directive relating to the determination of the place of supply of services would run counter to the objectives and the general scheme of those provisions, as reflected in paragraphs 30 and 31 of this judgment.
...
[44] ...An interpretation such as that envisaged in paragraph 42 of this judgment would ultimately amount to transferring tax revenue to a Member State other than that of final consumption of those services." (Climate Corporation Emissions Trading C-641/21)
- Intra-community supplies of goods and services factually similar, but subject to different rules
"[45] In the second place, it is true that, from a factual point of view, a supply of services by a taxable person established in one Member State to a taxable person established in another Member State is similar to an intra-Community supply of goods, since both involve persons established in two Member States. The fact remains that, as EU law currently stands, the legal rules governing intra-Community supplies of goods and those of cross-border supplies of services within the European Union are distinct." (Climate Corporation Emissions Trading C-641/21)
B2B: DEFAULT RULE
(1) Place where recipient has established their business
"The place of supply of services to a taxable person acting as such shall be the place where that person has established his business. However, if those services are provided to a fixed establishment of the taxable person located in a place other than the place where he has established his business, the place of supply of those services shall be the place where that fixed establishment is located. In the absence of such place of establishment or fixed establishment, the place of supply of services shall be the place where the taxable person who receives such services has his permanent address or usually resides." (PVD Article 44)
"[34] In the scheme of Article 44 of the VAT Directive, the place where the taxable person has established his or her business is the primary point of reference for determining the place of supply of services, while the other two points of reference it sets out are by way of exception and in the alternative, respectively (see, to that effect, judgment of 16 October 2014, Welmory, C‑605/12, EU:C:2014:2298, paragraphs 53 to 56)." (Climate Corporation Emissions Trading C-641/21)
- Purpose of default: simplicity and certainty
"[39] As a preliminary point, it should be borne in mind that, according to settled case-law, the most appropriate, and thus the primary, point of reference for determining the place of supply of services for tax purposes is the place where the taxable person has established his or her business, because, as an objective criterion that is simple and practical, it offers great legal certainty..." (SC Adient C-533/22)
Business established where central administration carried on
"For the application of Articles 44 and 45 of [the VAT Directive], the place where the business of a taxable person is established shall be the place where the functions of the business’s central administration are carried out." (IR Article 10)
(2) Place where recipient has fixed establishment
"For the application of Articles 44 and 45 of [the VAT Directive], the place where the business of a taxable person is established shall be the place where the functions of the business’s central administration are carried out." (IR Article 10)
- Only relevant if place of business does not lead to a rational result or creates conflict
"[39]...By contrast, the connection to the taxable person’s fixed establishment is a secondary point of reference which is an exception to the general rule and is taken into consideration provided that certain conditions are satisfied (see, to that effect, judgments of 16 October 2014, Welmory, C‑605/12, EU:C:2014:2298, paragraphs 53 to 56; of 7 April 2022, Berlin Chemie A. Menarini, C‑333/20, EU:C:2022:291, paragraph 29; and of 29 June 2023, Cabot Plastics Belgium, C‑232/22, EU:C:2023:530, paragraph 29).
[40] Accordingly, it is only if that connection to the place of business does not lead to a rational result or creates a conflict with another Member State that that secondary point of reference may come into consideration (see, in particular, judgments of 4 July 1985, Berkholz, 168/84, EU:C:1985:299, paragraph 17; of 7 May 1998, Lease Plan, C‑390/96, EU:C:1998:206, paragraph 24 and the case-law cited; and of 29 June 2023, Cabot Plastics Belgium, C‑232/22, EU:C:2023:530, paragraph 30 and the case-law cited)." (SC Adient C-533/22)
- Establishment characterised by sufficient degree of permanence + suitable resources
"(1) For the application of Article 44 of [the VAT Directive], a “fixed establishment” shall be any establishment, other than the place of establishment of a business referred to in Article 10 of this Regulation, characterised by a sufficient degree of permanence and a suitable structure in terms of human and technical resources to enable it to receive and use the services supplied to it for its own needs.
(2) For the application of the following Articles, a “fixed establishment” shall be any establishment, other than the place of establishment of a business referred to in Article 10 of this Regulation, characterised by a sufficient degree of permanence and a suitable structure in terms of human and technical resources to enable it to provide the services which it supplies..." (IR Article 11)
- Sufficiently permanent and suitable structure to enable it to receive and use services
"[42] For a taxable person to be considered as having a fixed establishment in a Member State in which the services concerned are provided to it, it must, therefore, have in that Member State a sufficiently permanent and suitable structure to enable it to receive the services concerned there and to use them for its business (judgment of 29 June 2023, Cabot Plastics Belgium, C‑232/22, EU:C:2023:530, paragraph 31)." (SC Adient C-533/22)
- Not dependent solely on legal statues: economic reality
"[43] As the Court has repeatedly held, the treatment of an establishment as a fixed establishment depends on the substantive conditions set out in Implementing Regulation No 282/2011, in particular in Article 11 thereof, which must be assessed in the light of economic and commercial realities, with the result that treatment cannot depend solely on the legal status of the entity concerned (judgment of 7 May 2020, Dong Yang Electronics, C‑547/18, EU:C:2020:350, paragraphs 31 and 32)." (SC Adient C-533/22)
Contractual arrangement giving rise to fixed establishment
- Not sufficient that the two companies are part of the same group
"[44]It follows that, while it is possible that a subsidiary providing services, established in a Member State, constitutes the fixed establishment of its parent company which is the recipient of those services, established in another Member State or third country, that treatment may not be deduced merely from the fact that that parent company has a subsidiary there (judgment of 7 April 2022, Berlin Chemie A. Menarini, C‑333/20, EU:C:2022:291, paragraph 40 and the case-law cited).
[45] For the same reasons, nor can the fact that two companies, legally independent of each other, belong to the same group, in itself determine the existence of a fixed establishment of the company receiving the services supplied by the second company." (SC Adient C-533/22)
- Only where contract means that recipient of service has suitable structure and resources at its disposal
"[46] Nor can the existence of a fixed establishment be inferred from the mere fact that both companies are legally bound as between themselves by a contract which sets out the conditions under which the services provided by one company for the exclusive benefit of the other are carried out.
[47] First, as the Court has repeatedly held, given that a legal person, even if it has only one customer, is assumed to use the technical and human resources at its disposal for its own needs, it is only if it were established that, by reason of the applicable contractual provisions, a company receiving services had the technical and human resources of its service provider at its disposal as if they were its own that it could be regarded as having a suitable structure with a sufficient degree of permanence, in terms of human and technical resources, in the Member State where its service provider has established its business (judgments of 7 April 2022, Berlin Chemie A. Menarini, C‑333/20, EU:C:2022:291, paragraph 48, and of 29 June 2023, Cabot Plastics Belgium, C‑232/22, EU:C:2023:530, paragraph 37).
[48] As the Advocate General observed in point 50 of her Opinion, the service provider acts, in principle, in his or her own name and economic interests as an independent contract partner, and not as a controlled component of the other contracting party.
[49] Consequently, the fact that the parties are bound by an exclusive service contract does not of itself mean that the service provider’s resources become those of his or her customer, unless it is shown that, under that contract, that provider does not remain responsible for his or her own resources and does not provide his or her services at his own risk (see, to that effect, judgment of 29 June 2023, Cabot Plastics Belgium, C‑232/22, EU:C:2023:530, paragraph 39)." (SC Adient C-533/22)
- Storage facility + staff remaining under the ultimate control of the service provider does not give fixed establishment
"[52] In that regard, in so far as it appears from the order for reference that all the companies in the Adient group have the same IT and accounting system, the fact that the employees of Adient Romania’s Pitești and Ploiești branches have access electronically to Adient Germany’s accounting system in order, inter alia, to register directly the raw materials supplied by Adient Germany and the finished products, does not, however, mean that Adient Germany possesses in Romania infrastructure such as to make it possible, independently, to carry out its own operations at the end of the manufacturing process for those products. Nor can the existence of such infrastructure be inferred from the fact that Adient Germany was provided with a storage facility for those products and the raw materials which it supplied to its service provider while retaining ownership over them.
[53] As regards the fact that the employees of the Pitești and Ploiești branches of Adient Romania perform functions which go beyond those normally assigned to them in the context of the supply of services carried out by it, and which make them intervene directly in the activities of supplying finished products to Adient Germany’s customers, it is for the referring court to determine whether, as Adient Germany argued before it, the activities that they carry out are limited to tasks directly related to the performance of the manufacturing service or are purely administrative in nature; it must also ascertain whether, in the light of the conditions of employment and remuneration of those employees, although the latter are contractually linked to Adient Romania, they are, in actual fact, removed from the hierarchical subordination of that company and placed at the disposal and under the authority of Adient Germany in the performance of the tasks entrusted to them." (SC Adient C-533/22)
B2C: DEFAULT RULE
- Not taken to be involved unless technical and human resources of establishment are use in fulfilment of supply
"(1) For the application of Article 192a of [the VAT Directive], a fixed establishment of the taxable person shall be taken into consideration only when it is characterised by a sufficient degree of permanence and a suitable structure in terms of human and technical resources to enable it to make the supply of goods or services in which it intervenes.
(2) Where a taxable person has a fixed establishment within the territory of the Member State where the VAT is due, that establishment shall be considered as not intervening in the supply of goods or services within the meaning of point (b) of Article 192a of [the VAT Directive], unless the technical and human resources of that fixed establishment are used by him for transactions inherent in the fulfilment of the taxable supply of those goods or services made within that Member State, before or during this fulfilment.
Where the resources of the fixed establishment are only used for administrative support tasks such as accounting, invoicing and collection of debt-claims, they shall not be regarded as being used for the fulfilment of the supply of goods or services.
However, if an invoice is issued under the VAT identification number attributed by the Member State of the fixed establishment, that fixed establishment shall be regarded as having intervened in the supply of goods or services made in that Member State unless there is proof to the contrary.’" (IR Article 53)
BANKING, FINANCE, INSURANCE
- Insurance corresponds to insurance exemption, banking and finance do not
"[52] However, as the Advocate General stated at point 69 of her Opinion, the reasoning in Swiss Re Germany Holding is linked to the fact that Articles 56(1)(e) and 135(1)(a) of Directive 2006/112 used essentially identical terms as regards insurance, namely ‘insurance transactions including reinsurance’ and ‘insurance and reinsurance transactions’.
[53] By contrast, there is no such link between ‘banking’ and ‘financial’ transactions in Article 56(1)(e) of that directive and any of the transactions listed in Article 135(1)(b) to (g) thereof. None of the latter provisions used the words ‘banking’ or ‘financial’ at all. The transactions listed were of a financial nature and many of them were likely to be carried out by banks, but not exclusively so, and they were far from being an exhaustive enumeration of all the transactions which can be carried out by a bank or which can be described as ‘financial’." (Deutsche Bank AG C-44/11)
- Applies to portfolio management
"[55] Having regard to the foregoing, the answer to the third question referred is that Article 56(1)(e) of Directive 2006/112 must be interpreted as covering not only the services referred to in Article 135(1)(a) to (g) of Directive 2006/112, but also portfolio management services." (Deutsche Bank AG C-44/11)
SERVICES OF CONSULTANTS
- Reference to services of professionals and similar not limited to such services being provided by professionals
"[37] It is apparent from the Court’s case-law that Article 9(2)(e), third indent, of the Sixth Directive does not refer to professions, such as those of lawyers, consultants, accountants or engineers, but to the services supplied by those professionals and similar services. The Community legislature has used the professions mentioned in that provision as a means of defining the categories of services to which it refers (Case C‑145/96 von Hoffmann [1997] ECR I‑4857, paragraph 15)." (Levob C-41/04)
Examples
- Programming and development of software is service of engineer or similar
"[37] In that regard, it is appropriate to note that computer science, including programming and the development of software, forms a significant part of the training given to future engineers and that it may often constitute one of the various specialisations available to them during that training.
[39] A service such as the customisation of computer software to the specific requirements of a consumer is therefore likely to be carried out either by engineers or by other persons trained to carry out such tasks.
[40] It follows that such a service is covered either by the services carried out by engineers or by those which are similar to the activity of an engineer." (Levob C-41/04)
- Supply of introductions (e.g. by matchmaker) not service habitually supplied by consultants
"[65] In my judgment accordingly, the service provided by G&F was not a service habitually supplied by consultants or consultancy firms giving expert advice to a client. What it did was different. Nor was the service either data processing or the supply of information. Accordingly, I would allow the appeal on ground 2 and restore the decision of the FTT. The service supplied by G&F to clients outside the UK and EU did not fall within article 59(c) and was within the scope of VAT accordingly." (HMRC v. Gray & Farrar International LLP [2023] EWCA Civ 121, Simler LJ)