Mere rental of real property not a VAT fixed establishment

In case C-931/19 Titanium, the Court of Justice of the European Union (CJEU) ruled against the existence of a fixed establishment for VAT purposes solely on the grounds of renting real property without the presence of staff in the country where the rented property is located.

Titanium, a company with registered office on the Island of Jersey that manages real estate, apartments and accommodation facilities, owned real property in Vienna and further rented it to Austrian business entities. Rentals of the properties constituted Titanium’s only activity in Austria, and they appointed an Austrian real estate management company to act as an intermediary vis-à-vis suppliers, keep business records, and carry out all administrative activities. Titanium retained all important decisions as regards renting the real property, such as entering into and terminating leases, arranging for repairs of the real property, etc.

The Austrian tax administrator was of the opinion that under Austrian legislation, the lease of immovable property located in Austria gives rise to a fixed establishment for VAT purposes, and, accordingly, Titanium was to pay VAT on its rental income in Austria. The question before the court was whether a fixed establishment must always involve human and technical resources or whether, in the specific case of renting real property, the real property itself could be regarded as a fixed establishment even without staff (human resources) of its own.

In the CJEU’s opinion, and in line with established case law, the concept of a fixed establishment requires the presence of both human and technical resources that would enable it to independently provide the services in question. In other words, the real property that has no human resources available through which it could act independently does not meet the criteria laid down in the case law for it to be classified as a fixed establishment for VAT purposes. In line with these conclusions, the CJEU held that if Titanium does not have its own staff through which they would rent the property, then the property cannot constitute a fixed establishment for VAT purposes.

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