Another CJEU judgment on the interpretation of the concept of fixed establishment
C-533/22 – Adient | The plaintiff in the case is Adient Ltd & Co. KG (Adient DE), headquartered in Germany, and a global supplier to automotive manufacturers.
Adient DE entered into a service contract with its group company in Romania (Adient RO). Adient RO undertook the sewing of automotive seat covers from materials provided by Adient DE, and also handled tasks related to storage of raw materials and finished products, as well as the receipt, inspection, and management of raw materials.
Adient DE sold the finished products directly to customers in Romania and other EU member states from Adient RO’s factories in Romania. For this purpose, Adient RO registered for VAT in Romania but did not have a fixed establishment there for economic purposes. Therefore, Adient RO considered that the German headquarters of Adient DE was the most concerned with the rendered services, and accordingly issued invoices referring to the international reverse charge mechanism.
However, the Romanian tax authority established that Adient RO’s services are subject to Romanian VAT because Adient DE had disposal over Adient RO’s personnel and material resources, which constitutes a fixed establishment in Romania. The Argeș County Court initiated preliminary ruling proceedings in this matter. The European Court of Justice provided further guidance after its rulings in Berlin Chemie (C 333/20) and Cabot Plastics Belgium (C 232/22), for the cases where the local subsidiary provides the human and technical resources for a foreign taxable person’s product sales. The court affirmed that mere affiliation within the same group does not automatically imply that one related party has access to the resources of another, even if the group members enter into service contracts.
The European Court of Justice also confirmed that merely using a local entity’s services to support product sales in another member state does not constitute a VAT establishment. Furthermore, the court affirmed that the same resources cannot simultaneously be used for both providing and receiving services; in other words, if Adient RO provides services to Adient DE using its resources, it cannot be considered that Adient DE simultaneously uses and utilizes those same resources.
