Permanent establishment – Intragroup supply of services

The Administrative Court of Appeal of Paris reminds that a permanent establishment may only be qualified, notwithstanding the main criteria of the head office, as the place of supply of services, only if it has enough permanence and adequate structure in terms of human and technical means that enables the services to be rendered in an independent manner.

In this case, the Court held that a French company was not a permanent establishment of the Irish company for marketing representation, management, back office and administrative assistance services, for the following reasons:

  • With regard to human means: the employees of the French company could not decide on their own about the online publication of the advertising spots. Indeed, campaigns could not start without the upfront approval and signature of the contracts by the management of the Irish company, even though the signature was automated and consisted in a simple validation and cross check of the contracts negotiated and elaborated by the employees of the French company
  • With regard to the technical means: even if the French equipment enabled the French company to access the digital resources of the group, the necessary infrastructures for rendering the services were located abroad

Accordingly, the existence of human and technical means did not exist in the case at hand.

This decision (in favor of the taxpayer) is interesting. Indeed, the concept of permanent establishment (service provider) should always be proved with bundled evidences in order to prove the cumulative presence of human and technical means.

Michel Guichard

Michel Guichard, Partner, leads the Indirect Tax activity. With more than 30 years’ experience in International and French Tax law, he advises his clients on indirect tax matters. Michel is […]