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Letting a property vs. fixed establishment


A property rented out in a Member State does not constitute a fixed establishment where the owner of that property does not have his own staff to provide rental services. This is the result of the CJEU (Court of Justice of the European Union) judgement of June 3, 2021 in the case Titanium Ltd versus Finanzamt Österreich, formerly Finanzamt Wien (C-931/19).

The judgement was issued in the case of Titanium Ltd, a company with its registered office on the island of Jersey, engaged in property management. The company was also active in Austria, with its activities in Austria being limited to the lease, taxable with VAT, of a real estate located in Vienna. The Company did not employ any staff in Austria, but only used services of an Austrian company, being an intermediary in relations with service providers and suppliers and also responsible for invoicing rent and maintenance costs as well as keeping business registers and preparing data concerning VAT returns. These services were carried out in premises other than the rental premises owned by Titanium Ltd. Titanium Ltd reserved the right to take all important decision concerning the leased property, such as entering into and terminating leases, determining conditions of the tenancy agreements, selecting service providers, and even selecting and supervising the property management company itself.

The Austrian tax authorities considered that in the case of VAT-taxable letting of a property situated in Austria there is always a fixed establishment in Austria. In contrast, the taxpayer was of the opinion that no fixed establishment had been established.

The court hearing the case decided to refer the question to the CJEU for a preliminary ruling, the essence of which was whether immovable property which is let in a Member State constitutes a fixed establishment in the circumstance where the owner of that property does not have his own staff to provide services relating to letting.

It follows from the already established case-law of the CJEU that a necessary condition for the existence of a fixed establishment is the permanent presence of the human and technical resources required to provide the services. The case-law is supported in the wording of Art. 11 of Implementing Regulation No. 282/2011, according to which a fixed establishment is characterised by ‘a suitable structure in terms of human and technical resources’.

In the case at issue, the CJEU stated that the property, which does not have any human resources enabling it to operate independently, does not satisfy the conditions necessary to be recognized as fixed establishment of the owner of the rented property.

The fact of having a fixed establishment in a given country has a vital importance for proper determination of the place of taxation and manner of settling tax. In accordance with the principle set out in Art. 28b of VAT Act, the place of taxation of services is the place where the taxpayer has a registered office, unless the service is provided to his fixed establishment in another country – in such a case the place of taxation will be the country where the fixed establishment is located. At the same time, having a fixed establishment will exclude, in some cases, the possibility of application of the reverse charge mechanism – both in respect of the services provided and goods supplied. Thus, there is no doubt that the CJEU’s standpoint expressed in the Titanium Ltd (C-931/19) ruling will have consequences both for foreign entities conducting business in Poland and for Polish taxpayers present in foreign markets.


Barbara Otrzonsek, Tax Advisor, ATA Tax Sp. z o.o.

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