Difference in the concept of establishment for VAT taxpayer purposes and for non-established VAT refund procedure purposes. Decision from the Economic-Administrative Court


Following the doctrine of the Court of Justice of the EU and based on Directive 2008/9/EC (formerly Eighth Directive), the Central Economic-Administrative Court establishes a conceptual difference between the status of established person according to the article 84.Two of the VAT Act against the provision of article 119 of the same Act. Under this approach, the article 84.Two does regulate the taxpayer condition, while the article 119 will determine if the entrepreneur or professional can apply the special procedure for non-established in order to claim the input VAT.

In this case, a non-resident entity has in the Spanish VAT territory a permanent establishment (PE), consisting of a rustic land which is leased, thus charging VAT for this service. In turn, the activity of the company in Spain is related to the provision of services for maintenance of photovoltaic panels, for which does not intervene in any way the PE.

In 2011 the company requested a refund of VAT paid on their daily activity (photovoltaic panels) by the special procedure for not established operators. However, the tax authorities rejected the application considering that the company had in the VAT territory a PE from which it made supplies of goods and services, so they were requested to follow the general procedure for refunding the VAT, regulated in the article 115 of the VAT Law. Contrary, the company understood that, even when it does not dispute the existence of the PE, such establishment does not intervene at all in the transactions by which the VAT is claimed, this leading him to be compared to an unestablished operator and, therefore, able to claim the VAT by that special procedure.

The Court considers that, since it is not disputed the existence of PE, the discussion deals with the procedure to be followed by the entity to recover the VAT. In this sense, it goes to the literal wording of the provision (Article 119) to determine if this is the correct procedure:

“One. Entrepreneurs or professionals not established in the territory of application of the tax, who fulfil the requirements below, may exercise the right to refund of value added tax they have paid or, where applicable, they have been impact in that territory, in accordance with the provisions of this article.

For this purpose, they shall be treated as not established in the territory of application of the tax, businessmen or professionals who, being holders of a permanent establishment situated in that territory and not made from that establishment supplies of goods or provision of services”.

Therefore, the main requirement for a taxpayer to use this special procedure is to be not-established in the VAT territory or, if you have a PE, to not carry out taxable supplies from this PE. Similarly, The Directive 2008/9/EC, which regulates this procedure at Community level, does establish as one of the requirements:

“A) during the refund period, have not had in the Member State of refund, the seat of his economic activity, or a fixed establishment from which business transactions were effected.”

That is, at no time is set by the national Law or the Directive of the Community that the PE should not interfere with transactions linked to those for which a refund is requested, but that has not done taxable business in general. Therefore, from the time you make a transaction subject to VAT from the PE, the taxpayer must request any refund under the general procedure, although the activities of the PE are not related to the VAT to be refunded.

This same approach applies the ECJ (Judgement July 16, 2009, Case-Law C-244/08), stating that “the existence of active transactions in the Member State in question is the key to not have recourse to the Eighth Directive”

Therefore, the national Court contrasts in the judgment the criteria related to the PE and intervention in the transactions as regard the article 84.Two of the VAT Act against the article 119, since the article 84.Two, where is expressly required the intervention of the PE in the transactions, is solely for the purpose of considering the business or professional as established or not in the sense of his status as taxpayer, while the requirements of the article 119 does not mention at any time the necessary intervention of the PE in the transactions, but only that they have carried out taxable supplies from this, whether other different transactions.

A copy of the judgment of the Court, dated May 21, 2015 is attached.

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