ECJ Titanium: no fixed establishment if the owner of the property does not have its own staff

Titanium entrusted the management of the property to an Austrian real estate management company to act as intermediary between the service providers and suppliers, to invoice rental payments and operating costs, to maintain business records and to prepare VAT declaration data. This company provided its services from its own offces and with its own staff. Titanium retained the decision-making power to enter into and terminate leases, to determine the economic and legal conditions of the rental agreements, to make investments and repairs, to organise the financing and, finally, to select, appoint and oversee the real estate management company itself.

Titanium always considered that it had the status of a nonestablished entity in Austria and therefore did not charge VAT on its invoices using the reverse charge system. However, the Austrian tax authority’s view was that a property which was rented out constituted a permanent establishment, which meant that Titanium was a taxable person for VAT purposes and therefore was obliged to charge VAT on invoices issued to tenants.

The ECJ had to sort out whether a rented property constitutes a fixed establishment in the circumstance where the owner of that property does not have its own staff to provide services relating to the rental. The ECJ decided that Titanium did not have a fixed establishment in Austria. A property which is rented in a member state, in the circumstance where the owner of that property does not have its own staff to perform services relating to the rental, does not constitute a fixed establishment. A fixed establishment always requires its own human and technical resources. Both requirements must be met cumulatively. As the ECJ´s decision made remarkably clear, using an external service provider cannot compensate for the lack of one’s own staff.

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