Fixed Establishment (VAT)

The two tests: permanence, and people plus equipment

Article 11 asks for both things at once. Permanence rules out a stand at a trade fair or a team that flies in for a project. A “suitable structure in terms of human and technical resources” asks for the means to actually do the work: people, and the equipment they use. The Commission’s One Stop Shop guidance repeats the test in the same words: a fixed establishment “should have a sufficient degree of permanence and a suitable structure in terms of human and technical resources to receive and use or to make the respective supplies.”

Two things are expressly not enough. Article 11(3) says “the fact of having a VAT identification number shall not in itself be sufficient to consider that a taxable person has a fixed establishment,” and the Commission says the same in its OSS guidance. Article 10(3) adds that “the mere presence of a postal address may not be taken to be the place of establishment of a business.” A US company that registered for VAT in Germany to sell there, or that rents a mail drop in Dublin, has not created a fixed establishment by doing so.

What the Regulation doesn’t do is list examples. Whether one remote employee, a rented server, a co-working desk or a local contractor amounts to a fixed establishment depends on the facts of that structure, judged against those two conditions. The text answers what the test is, not how a particular setup scores on it. That judgment belongs with a VAT adviser who knows the setup.

What a fixed establishment changes for the One Stop Shop

The Commission’s registration guidance draws the line plainly. The non-Union scheme is for a taxable person “who has neither established his business nor has a fixed establishment in the EU,” and that seller “can choose any Member State to be the Member State of identification.” The Union scheme is for a business that “has established his business in the EU or has a fixed establishment there.”

For a non-EU seller, a fixed establishment therefore decides three things.

First, which scheme. The Commission lists setting up a fixed establishment in a member state as a reason for exclusion from the non-Union scheme. The seller “will be deleted from the non-Union scheme and can register in the Union scheme,” with the exclusion effective from the first day of the calendar quarter after the exclusion decision.

Second, which member state. “If a taxable person has not established his business in the EU, but has a fixed establishment in the EU, the Member State of identification is the Member State in which he has that fixed establishment.” With fixed establishments in several member states, the seller picks one and is bound by that choice for the calendar year and the two following years, unless that fixed establishment closes or moves.

Third, what goes on the return. In the Union scheme, “a Member State of establishment cannot be the Member State of consumption for supplies of services.” Consumer services in the fixed establishment’s country go on its domestic VAT return instead. The Commission’s example is a Dutch trader with fixed establishments in France and Belgium: its sales to consumers in Germany and Austria go on the Dutch OSS return, and its sales to consumers in France go on the French domestic return.

The Union scheme return also splits services by where they were supplied from: those supplied from the member state of identification (or from fixed establishments outside the EU), and those supplied from fixed establishments in other member states. A seller with fixed establishments in more than one country lists each of them, with its VAT number or tax reference, in its OSS registration, and has to report any change by the tenth day of the following month.

The 10,000 EUR threshold disappears

Small EU sellers can charge their home country’s VAT on cross-border consumer sales of electronic services and intra-EU distance sales of goods until those sales pass 10,000 EUR a year. A non-EU business with a fixed establishment in the EU cannot. The Commission is direct: “Suppliers who have established their business outside the EU and have one or more fixed establishment(s) in the EU cannot make use of the threshold, because the application of the threshold requires that that supplier be only established in one single Member State (and nowhere else).”

In practice, a US software company that opens a small EU office charges destination-country VAT on its consumer sales from the first euro, through the Union scheme, with the fixed establishment’s own country handled on its domestic return.

When your customer has the fixed establishment

The definition also works on the buying side. Article 11(1) is written for Article 44 of the VAT Directive, the general rule for services between businesses: when a service is supplied to a fixed establishment of the customer that is in a different place from its head office, the place of supply is that fixed establishment. For a seller of B2B software, that means the right customer location can be the branch office that buys and uses the subscription, not the company’s head office. Our place of supply entry covers the wider rules.

A seller’s own fixed establishment can matter for who pays the VAT, too. Article 192a of the Directive treats a supplier with a fixed establishment in the member state where VAT is due as not established there, for the supply in question, when that fixed establishment doesn’t take part in it. Article 53(2) of the Regulation says the fixed establishment counts as intervening only if its “technical and human resources… are used by him for transactions inherent in the fulfilment of the taxable supply.” Where it doesn’t intervene, the supply to a business customer can stay under the reverse charge.

Stripe, the registration types, and your QuickBooks ledger

Stripe Tax models the two OSS schemes as separate registration types: oss_non_union and oss_union. A move from the non-Union to the Union scheme is therefore a change of registration in Stripe, not a setting on the existing one, and the start date should match the quarter the tax authority gives you. Sales to consumers in the fixed establishment’s own country belong under a standard registration there, the type Stripe describes as the general form of registration “for a business in a specific location, regardless of whether the business is established there.”

In QuickBooks, the change shows up as one more VAT liability to track separately. Before the fixed establishment, every EU consumer sale cleared through one OSS payment to one member state. After it, the fixed establishment’s country has its own domestic return, filing calendar and payment, while the rest of the EU stays on the OSS return. Keep the two apart in your liability accounts, or at least in a per-country breakdown, so each payment can be tied back to the return it settles. Our input VAT entry covers the other side of a domestic return: VAT on the fixed establishment’s own costs can usually be reclaimed on it, which OSS doesn’t allow.