Important ruling of the CJEU on VAT and fixed establishment

On June 3rd, 2021, the Court of Justice of the European Union (CJEU) issued a further ruling (case C-931/19, Titanium Ltd) on the issue of fixed establishment (FE) for VAT purposes.


The CJEU has stated that the FE cannot be established solely on the basis of technical infrastructure i.e. without personnel. Consequently, in a situation where the owner of a rented property does not have his own staff to provide the rental services, the property does not constitute a fixed establishment for VAT purposes.


The case concerned the company Titanium established in Jersey, that rented real estate in Austria. As it did not have its own staff in Austria, it used the services of an Austrian management company (which was responsible for intermediary relations with contractors, invoicing and keeping tax settlements). However, Titanium retained the decision-making power to enter into and terminate rent agreements, determine their terms, and select suppliers, including the property management company. The Austrian tax authority concluded that the rented property constituted an FE for Titanium in Austria.

The case was brought to the court which requested the CJEU for a preliminary ruling:

– is the term ‘fixed establishment’ to be interpreted as meaning that the existence of human and technical resources is always necessary and therefore that the service provider’s own staff must be present at the establishment, or can — in the specific case of the letting, subject to tax, of a property situated in national territory, which constitutes only a passive tolerance of an act or situation — that property, even without human resources, be regarded as a ‘fixed establishment’?

When answering the question, the CJEU stated that when the entrepreneur has only technical facilities (real estate) and no human resources enabling it to act independently, then it clearly does not satisfy the criteria to be considered as a fixed establishment. Consequently, the property which is let in a Member State in the circumstance where the owner of that property does not have his own staff to perform services relating to the letting does not constitute a fixed establishment.


Although the CJEU referred only to the cases of rental of the real estate, the sentence of the ruling may also be applied to other scenarios, where a foreign taxpayer does not have its own staff in Poland.

For example, in the cases of purchase of warehousing and logistics services in Poland, the tax authorities have so far stated (relying in particular on the ruling of the CJEU in the Welmory case, C-605/12) that, despite the lack of own human and technical resources, the FE may be deemed to arise because the rented warehouse constitutes a technical facility and the service provider’s personnel working in the warehouse should be considered as the service recipient’s personnel resources. In such cases, however, similarly as for Titanium, the recipient undertakes all important decisions concerning the purchase of warehousing services and concluding contracts with contractors at its registered office and not in the warehouse rented from the third party, and usually it does not have any personnel in Poland.

This begs the question of whether the above entities should once again consider changing their method of accounting for purchases of services in Poland?

From the VAT perspective this matter is very significant, because the creation of a fixed establishment in Poland has a direct impact on the rules of taxation of services rendered in connection with the existence of this fixed establishment or the input VAT refund procedure. With regard to services, this issue is best illustrated by the table below:

Assessment that a taxpayer has a fixed establishment in Poland
Settlement of services: Service provider Service recipient
issues an invoice with VAT deducts VAT from purchase invoices
If the tax office determines that there is no FE: a tax overpayment; administrative expenses connected to corrections of VAT returns and refund of the overpayment no right to deduct VAT; tax arrears as well as the interest arise, possibly even additional tax liability
Assessment that a taxpayer does not have a fixed establishment in Poland
Settlement of services: Service provider Service recipient
No taxation in Poland import of services in the country of residence
If the tax office determines that there is FE: tax arrears as well as the interest arise, possibly even additional tax liability the service provider may demand payment of VAT; the issue of VAT deduction arises

In our opinion, the CJEU ruling on Titanium case is undoubtedly a step in the right direction, but we should not expect an immediate reversal of the tax authorities’ aggressive approach to fixed establishment. It can be expected that the FE issue will continue attract the interest of tax offices in Poland in the near future who, depending on the taxpayer’s position, may question whether VAT is due or challenge the right to VAT deduction.


Therefore, we are happy to share our experience with you and we are ready to support you in particular by:

  • analysis of the conducted business in terms of meeting the criteria for the creation of fixed establishment in Poland, including existing resources as well as the infrastructure and the purpose for which they are used,
  • preparation of the so-called “defense file”, whose task is to present the arguments indicating the correctness of the adopted method of settling transactions for VAT purposes before the controllers,
  • financial simulation illustrating the potential amount effects of the adopted method of settlement resulting from the creation of fixed establishment in Poland,
  • verification of individual tax rulings in terms of whether they sufficiently secure the adopted method of settlements in the light of the current approach of controllers and the adopted manner of operation of the enterprise,
  • preparation of applications for tax rulings regarding the correctness of the method of settlement used,
  • support and representation before tax authorities and administrative courts, developing an optimal line of defense,
  • modification of the business model – support in developing or implementing new business models / structures that are optimal in terms of securing potential tax risks.



If you are interested in obtaining further information, or would like to discuss the impact of the above changes please contact:

Tomasz Michalik                              tel. (+48) 501 733 720

or your advisor at MDDP.


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