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ECJ: toll manufacturer does not trigger fixed establishment for VAT

The European Court of Justice (ECJ) completed its string of subsequent decisions on fixed establishments for VAT purposes and confirmed its previous case law. In its latest judgment of 29 June 2023 -‘Cabot Plastics’ case (C-232/22) – the ECJ found that an exclusive toll manufacturer does not constitute a fixed establishment for its principal.


Cabot Plastics, a company established in Belgium, uses exclusively its own equipment to process, for the benefit and under the direction of Cabot Switzerland, a company resident in Switzerland, raw materials into products used in the manufacture of plastics (toll manufacturing). In addition, Cabot Plastics also provided ancillary logistics services to Cabot Switzerland. The two entities are legally independent but belong to the group, and the services provided by Cabot Plastics to Cabot Switzerland constituted almost all of its turnover. Cabot Plastics issued its invoices with regard to the services rendered without VAT, however, the Belgian tax authorities considered that the Swiss company had a "fixed establishment" in Belgium via Cabot Plastics and therefore the place of supply between the contracting parties was Belgium and Belgian VAT was (over)due.

As a general rule, fixed establishment (FE) serves as a point of reference for VAT purposes within the EU, and the existence thereof determines whether VAT is chargeable and whether in the given Member State. It also follows that Member States are keen to ‘attract’ fixed establishments’ in their jurisdiction. The term fixed establishment had been clarified in the VAT Regulation of the European Union since 2011, however, the interpretation of the concept regularly leads to disputes with foreign tax authorities, like the one at hand.


The ECJ firstly reminded that in accordance with the EU VAT Regulation, the primary point of reference for determining the place of supply of services to a taxable person is the place where that person has established its business, because, as an objective criterion that is simple and practical, it offers great legal certainty. Another (fixed) establishment comes into consideration only if that place of business does not lead to a rational result or creates a conflict with another Member State. Secondly, the fixed establishment (if any) should be characterised by a sufficient degree of permanence and a suitable structure in terms of human and technical resources to enable it to receive and use the services provided to it for its own needs.

No resources, no FE

In the current case, ECJ found that the exclusive toll manufacturing agreement does not allow the principal Cabot Switzerland to use Cabot Plastics’ human and technical resources as they belong to the Cabot Switzerland. Cabot Plastics remained responsible for its own resources and carries out the toll manufacturing services at its own risk. As a consequence, ECJ established that Cabot Switzerland should not be considered as having an FE in Belgium.

Further context

In its previous decision in case C-547/18 (Dong Yang Electronics sp. z o.o.) ECJ already established that the existence of a fixed establishment (or lack thereof) within the EU depends on the substantive legal circumstances and fact pattern of a case and this can only be assessed in the light of the real economic and commercial content, but this task belongs to the tax authority, by default. In the given case the court also concluded that a fixed establishment of a company established in a non-Member State may not be inferred by a supplier of services from the mere fact that that company has a subsidiary there, and that supplier is not required to inquire, for the purposes of such an assessment, into contractual relationships between the two entities.


The latest judgment of the ECJ reassures that, as a general rule, still the place of establishment is the primary point of reference for VAT purposes, however, the case-by-case evaluation of a potential fixed establishment is still necessary based on the well-documented criteria of the EU VAT Regulation and the corresponding case law.