The existing academic research on the legal consequences connected with permanent establishments ininternational income tax law is immense. In the increasingly important field of value added tax (VAT) the role of permanent establishments is, however, comparatively unexplored. This project aims at identifying the role and functions of permanent establishments for VAT purposes.

Due to the lack of an international legal basis, the legal analysis conducted within in this project will largely focus on the harmonization already achieved within the EU via the EU VAT Directive 2006/112/EC. In the VAT area, permanent establishments are primarily used as a consumption proxy and serve – comparable to income tax – as a tool to allocate taxing rights between states. The EU legislator and the ECJ have recently begun to put more focus on the definition and the interpretation of the instrument of a “fixed establishment”. The legal basis and jurisprudence, however, do not seem to build on a consistent concept which may lead to legal uncertainty, double taxation and non-taxation. Within this project, the existing EU VAT system applicable to permanent establishments will be thoroughly analysed in the light of important VAT principles (e.g. neutrality principle) and other legal constraints (e.g. freedom of establishment). Moreover, based on a systematic comparison with other VAT systems (Australia, Switzerland) and the solution proposed by the OECD (“recharge method”), a best practice and a proposal for a future legal basis will be developed.

Dr. Karoline Spies