VAT Fixed Establishment In Parent-subsidiary Supplies

The Court of Justice of the European Union (the "CJEU") has further clarified the concept of a 'fixed establishment' for VAT purposes. In the recently published case Berlin Chemie A. Menarini (decision C-333/20 of 7 April 2022), the CJEU held that a foreign subsidiary that provides services exclusively to its parent company established in another Member State does not automatically qualify as a fixed establishment of the parent company.

A German company involved in the marketing and sale of pharmaceutical products concluded a service contract with its Romanian subsidiary for the purposes of promoting, advertising and marketing its sales in Romania. The German parent company was the only client of its Romanian subsidiary and had access, in particular, to technical resources of the subsidiary such as computers, operating systems and vehicles. The German parent company directly supplied its products to its customers in Romania.