The Regulation establish a definition for a fixed establishment in accordance to which this will be any establishment other than the place of the establishment of the business characterized by a sufficient degree of permanence and suitable structure of both human and technical resources which enable it to receive and use the services supplied for its own needs. The Bulgarian tax authorities have indicated their reliance on the same definition in several pieces of guidance. With respect to this definition, a representative office may qualify as a fixed establishment under the Regulation with regard to the services it acquires for its own needs. This may cause practical problems with respect to the recovery of VAT paid by representative office under the local rules implementing 9th or 13th VAT Directive as such refund is not allowed if the claimant has a fixed establishment in the country.
The Regulation also provides guidance on how to determine to or from which fixed establishment a service is provided and if a fixed establishment has intervened in a supply. This could be useful in different situations – for example, to assess if a supplier shall charge VAT for supplies made to a branch of its customer in the country of the supplier; or if a supplier thought its fixed establishment in its customer’s country may be liable to charge VAT in the customer’s country.
(to be continued)