NNDKP CELF Alert No. 3/2023 – CJEU ruled that toll manufacturing arrangements do not create VAT fixed establishments in the country of the service provider

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30.06.2023 – CJEU ruled that toll manufacturing arrangements do not create VAT fixed establishments in the country of the service provider

The Romanian version of this newsletter is available here.

On 29 June 2023, in case C-232/22 Cabot Plastics, the CJUE decided that a taxable person established outside the EU does not have a fixed establishment in a EU Member State if it receives from a taxable person from the same group and established in that EU Member State toll manufacturing and ancillary services which contribute to the performance of its taxable operations in that EU Member State, even if the services are received under an exclusive contractual commitment.


The dispute in which the CJUE was asked to rule was whether Cabot Switzerland, a taxable person established in Switzerland, can be considered to have an adequate structure constituting a fixed establishment if it receives services (toll manufacturing and other ancillary service) from Cabot Plastics in Belgium, who is part of the same group. In should be noted that Cabot Plastics uses its human and technical resources exclusively for the services provided to Cabot Switzerland, the services provided to Cabot Switzerland representing almost all of its sales.

In particular, Cabot Plastics also provided a series of additional services to Cabot Switzerland, especially storage of products, including managing products stored in third-party warehouses, making recommendations aimed at optimizing the manufacturing process, carrying out internal and external technical checks and assessments, reporting the results to Cabot Switzerland and making deliveries or providing services needed by other production units. In that respect, Cabot Plastics:

  • provided comments on the operational requirements of its factories;
  • facilitated customs formalities for Cabot Switzerland;
  • complied with Cabot Switzerland’s quality control and quality assurance standards and procedures;
  • provided Cabot Switzerland with support for improving the manufacturing processes and the planning of its business;
  • provided administrative support in relation to customs and excise duties;
  • acted as official importer on behalf of and at the request of Cabot Switzerland; and
  • managed packaging equipment.

It had to be determined whether the staff of the service provider and the instructions of the recipient of the service could be regarded as being at the disposal of Cabot Switzerland.


The CJUE decided that Cabot Switzerland does not have a fixed establishment in Belgium.

The key arguments in C-232/22 Cabot were:

  • The Court reminded that the qualification of fixed establishment cannot depend solely on the legal status of the entity concerned, and that the fact that a company has a subsidiary in an EU Member State does not in itself mean that it also has its fixed establishment there.
  • Also, the Court recalled that the fixed establishment is an exception when determining the place of taxation of services which must lead to a rational result and not create a conflict of tax jurisdiction, the need to consider the beneficiary and not the supplier of services and that the same resources cannot supply and receive the same services.
  • Since the provider of the services remains responsible for its own resources and provides those services at its own risk, the contract for the provision of services, although exclusive, does not in itself have the effect of that the resources of that supplier becoming those of its client.
  • One must determine the place where the human/technical resources which the recipient uses to receive the services are located, and not the place where the resources which it uses for its subsequent sales activity are located.
  • The Court has held that the human and technical resources that form the fixed establishment cannot be occasionally and, even if not necessary to own them, it is necessary to have the power to dispose of them in the same manner.
  • The services ancillary to the toll manufacturing (management of the stock of raw materials, their inventory at the end of the year, quality control, the management of the stock of finished products and the preparation of orders before shipment), facilitating the economic activity of the recipient, such as the sale of products resulting from contract work, are irrelevant for determining the fixed establishment.
  • Lastly, the CJEU reminded the fact that the results of the services are essentially for the benefit of consumers in the Member State in which the service provider is located is not relevant for determining whether the customer of those services has a fixed establishment in that Member State and that a fixed installation used solely for the purpose of carrying out activities preparatory/ancillary for the business of the recipient of the services does not represent a fixed establishment.


The ruling in case C-232/22 Cabot brings clarity that the human and technical resources, even if used exclusively for the benefit of one taxable person, are used by the services provider, and not by its client.

It clarifies uncertain points left after the previous decision in case C-547/18 Dong Yang covering similar arrangements.

In Romania, the decision is welcomed since ANAF had a particular interest in challenging toll manufacturing arrangements between related parties especially referring to the ancillary/additional activities to the toll manufacturing.

In this respect, we expect that the upcoming decision in the Romanian sourced case C-533/22 Adient (expected until the end of 2023) covering similar arrangements, to bring further clarity and hopefully stop ANAF’s practice.

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