Opinion of the Advocate General — ECLI:EU:C:2019:976
Date: 2019-11-14
Language of the case: Polish
Subject matter: Taxation;Value added tax
Procedure: Reference for a preliminary ruling
Origin: Poland

Translation  C-547/18 — 1 
Case C-547/18 
Request for a preliminary ruling 
Date of receipt: 
23 August 2018 
Referring court: 
Wojewódzki Sąd Administracyjny we Wrocławiu (Poland) 
Date of issue of the decision on the request for a preliminary ruling: 
6 June 2018 
Applicant: 
Dong Yang Electronics Sp. z o.o. 
Defendant: 
Dyrektor Izby Administracji Skarbowej we Wrocławiu  
  
[…] 
DECISION 
On 6 June 2018, 
the Wojewódzki Sąd Administracyjny we Wrocławiu (Regional Administrative 
Court in Wrocław) 
[…] 
having examined […] […] 
the appeal lodged by Dong Yang Electronics Sp. z o.o., established in Biskupice 
Podgórne, against the decision of the Director of the Tax Administration Chamber 
in Wrocław 
of 20 December 2017  […] 
concerning the tax on goods and services (VAT) for the months from January to 
December 2012, 
EN 
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decides:  
I. to refer the following questions concerning the interpretation of the provisions 
of EU law to the Court of Justice of the European Union for a preliminary ruling 
pursuant to Article 267 TFEU […]: 
1. Can it be inferred, from the mere fact that a company established outside the 
European Union has a subsidiary in the territory of Poland, that a fixed 
establishment exists in Poland within the meaning of Article 44 of Council 
Directive 2006/112/EC of 28 November 2006 on the common system of 
value added tax […] and Article 11(1) of Council Implementing Regulation 
(EU) No 282/2011 of 15 March 2011 laying down implementing measures 
for Directive 2006/112/EC on the common system of value added tax (recast 
[…])?[Or. 2] 
2. If the first question is answered in the negative, is a third party required to 
examine contractual relationships between a company established outside 
the European Union and its subsidiary in order to determine whether the 
former company has a fixed establishment in Poland? 
II. to stay the proceedings in the case pursuant to Article 124(1)(5) of the Ustawa 
z dnia 30 sierpnia 2002 r. Prawo o postępowaniu przed sądami administracyjnymi 
[…] (Law of 30 August 2002 — Law on Proceedings before Administrative 
Courts) pending the answer to the above question[s] referred for a preliminary 
ruling. 
[…] 
[Or. 3] GROUNDS 
1. Legal framework — legal situation in 2012 
1.1. The following provisions of Polish law apply to the tax proceedings and 
administrative judicial proceedings in the present case 
(in their wording in force from 21 August 2011 to 1 January 2013): 
- Article 28b(1) of the Ustawa z dnia 11 marca 2004 r. o podatku od towarów 
i usług […] (Law of 11 March 2004 on the Tax on Goods and Services, ‘the VAT 
Law’) provides that, in the case of services supplied to a taxable person, the place 
where those services are supplied is the place where the taxable person who 
receives such services has established his business, subject to paragraphs 2 to 4 
and Article 28e, Article 28f(1) and (1a), Article 28g(1), Article 28i, Article 28j(1) 
and (2), and Article 28n; 
- Article 28b(2) of the VAT Law provides that where services are supplied for 
a taxable person’s fixed establishment which is in a place other than the place 
DONG YANG ELECTRONICS 
 
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where he has established his business or has his permanent address, the place 
where those services are supplied is the place of the fixed establishment; 
- Article 19(1) of the VAT Law provides that a chargeable event occurs at the 
time when goods or services are supplied, subject to paragraphs 2 to 21, 
Article 14(6), Article 20 and Article 21(1); 
- Article 19(4) of the VAT Law provides that, if the supply of goods or 
services has to be confirmed by an invoice, the chargeable event occurs at the time 
when the invoice is issued, but not later than seven days after the date on which 
the goods or services are supplied; 
- Article 13(3) of the Ustawa z dnia 2 lipca 2004 r. o swobodzie działalności 
gospodarczej […] (Law of 2 July 2004 on Freedom of Commercial Activity) 
provides that foreign nationals other than those mentioned in paragraphs 1 to 2a 
have the right to take up and pursue commercial activity exclusively in the form of 
a limited partnership, limited joint-stock partnership, limited liability company or 
joint-stock company, and they have the right to become partners of such 
partnerships or companies or to subscribe for, or acquire, their shares unless 
international agreements provide otherwise. 
1.2. The following provisions of EU law are applicable: 
[Or. 4] - Article 44 of Council Directive 2006/112/EC of 28 November 2006 
on the common system of value added tax […] (‘Directive 2006/112/EC’) 
provides that: ‘The place of supply of services to a taxable person acting as such 
shall be the place where that person has established his business. However, if 
those services are provided to a fixed establishment of the taxable person located 
in a place other than the place where he has established his business, the place of 
supply of those services shall be the place where that fixed establishment is 
located. In the absence of such place of establishment or fixed establishment, the 
place of supply of services shall be the place where the taxable person who 
receives such services has his permanent address or usually resides.’; 
- Article 10(1) of Council Implementing Regulation (EU) No 282/2011 of 
15 March 2011 laying down implementing measures for Directive 2006/112/EC 
on the common system of value added tax (recast) ([…] ‘the EU Regulation’) 
provides that, for the application of Articles 44 and 45 of Directive 2006/112/EC, 
‘the place where the business of a taxable person is established shall be the place 
where the functions of the business’s central administration are carried out’; 
- Article 11(1) of the EU Regulation provides that, for the application of 
Article 44 of Directive 2006/112/EC, a ‘fixed establishment’ is be any 
establishment, other than the place of establishment of a business referred to in 
Article 10 of the Regulation, characterised by a sufficient degree of permanence 
and a suitable structure in terms of human and technical resources to enable it to 
receive and use the services supplied to it for its own needs; 
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- Article 22(1) of the EU Regulation provides that, in order to identify the 
customer’s fixed establishment to which the service is provided, the supplier is to 
examine the nature and use of the service provided. 
Where the nature and use of the service provided do not enable him to identify the 
fixed establishment to which the service is provided, the supplier, in identifying 
that fixed establishment, is required to pay particular attention to whether the 
contract, the order form and the VAT identification number attributed by the 
Member State of the customer and communicated to him by the customer identify 
the fixed establishment as [Or. 5] the customer of the service and whether the 
fixed establishment is the entity paying for the service. 
Where the customer’s fixed establishment to which the service is provided cannot 
be determined in accordance with the first and second subparagraphs of paragraph 
1 or where services covered by Article 44 of Directive 2006/112/EC are supplied 
to a taxable person under a contract covering one or more services used in an 
unidentifiable and non-quantifiable manner, the supplier may legitimately 
consider that the services have been supplied at the place where the customer has 
established his business. 
1.3. International agreement: 
- Article 7.9(a) of the Free Trade Agreement between the European Union and 
its Member States, of the one part, and the Republic of Korea, of the other part 
([…], ‘the Agreement’) provides that establishment means: 
(I) the constitution, acquisition or maintenance of a juridical person; or 
(II) the creation or maintenance of a branch or representative office; 
- Article 7.11(1) of the Agreement provides that, with respect to market 
access through establishment, each Party is to accord to establishments and 
investors of the other Party treatment no less favourable than that provided for 
under the terms, limitations and conditions agreed and specified in the specific 
commitments contained in Annex 7-A; 
- Annex 7-A-2 to the Agreement, third table, provides as follows: ‘PL: With 
the exception of financial services, unbound for branches, Korean investors can 
undertake and conduct economic activity only in the form of a limited partnership, 
limited joint-stock partnership, limited liability company, and joint-stock company 
(in the case of legal services only in the form of registered partnership and limited 
partnership).’ 
2. Facts of the case 
2.1. Tax proceedings. 
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2.1.1. By the contested decision, the second-instance tax authority upheld the 
decision of the first-instance authority in which the goods and services tax 
(‘VAT’) liability of Dong Yang Electronics Sp. z o.o. in Biskupice Podgórne was 
determined for individual months of 2012. 
2.1.2. The tax authorities determined that Dong Yang Electronics sp. z o.o. 
supplied to LG Display Co. Ltd (Korea), established in Seoul, services consisting 
in the assembly [Or. 6] of printed circuit boards (PCBs) from materials (sub-
assemblies, components) owned by LG Display Co. Ltd (Korea). Those materials 
were issued to Dong Yang Electronics sp. z o.o. by LG Display Polska sp. z o.o., 
to which Dong Yang Electronics sp. z o.o. also supplied the finished PCBs. 
The service was supplied by Dong Yang Electronics sp. z o.o. to LG Display Co. 
Ltd (Korea) under an agreement of 27 October 2010. Dong Yang Electronics sp. 
z o.o. received from LG Display Co. Ltd (Korea) the assurance that the latter does 
not have a fixed establishment in Poland, does not employ staff, does not own 
property, and does not have technical resources there. Dong Yang Electronics sp. 
z o.o. issued to LG Display Co. Ltd (Korea) VAT invoices, treating those services 
as not subject to VAT within the territory of Poland, with the following 
annotation: grounds for tax treatment — Article 28b(2) of the VAT Law. On the 
invoices, LG Display Co. Ltd (Korea) was indicated as the recipient. 
The tax authorities took the view that the services provided by Dong Yang 
Electronics sp. z o.o. were in fact supplied not to LG Display Co. Ltd’s seat in 
South Korea but rather to the fixed establishment of LG Display Co. Ltd (Korea) 
in Poland. As the place of that fixed establishment, the authorities indicated the 
seat of its subsidiary — LG Display Polska sp. z o.o. in Biskupice Podgórne. The 
authorities examined the agreements under which LG Display Polska Sp. z o.o. 
supplied to LG Display Co. Ltd (Korea) manufacturing services which consisted 
in the assembly of parts owned by LG Display Co. Ltd (Korea) into ready-to-use 
TFT-LCD modules and also in the further storage and logistics of finished 
products. Both the parts and finished modules remain the property of LG Display 
Co Ltd (Korea) and are subsequently resold by the latter to another related 
company. On that basis, the tax authorities assumed that: 
- LG Display Co Ltd (Korea) created a fixed establishment in Poland by 
‘exploiting the economic potential’ of its subsidiary LG Display Polska through 
implementing a suitable business model by way of the agreements, and that fixed 
establishment was available for LG Display Co. Ltd (Korea) as if it were its own. 
As a result of having arranged its business relationships in that manner, LG 
Display Co. Ltd (Korea) did not need to maintain any technical or human 
resources in Poland, that is to say, it did not need to rent or lease any warehouses 
or employ any staff, which, however, does not preclude the existence of a fixed 
establishment of LG Display Co. Ltd (Korea) in Poland; 
[Or. 7] - Dong Yang Electronics sp. z o.o. should have examined the use of 
its services as required by Article 22 of the EU Regulation; had it done so, it 
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would have concluded that the actual beneficiary of the services supplied by the 
company was the structure in Biskupice Podgórne where LG Display Polska is 
based, whereas Dong Yang Electronics sp. z o.o. relied exclusively on the LG 
Display Co. Ltd (Korea) statement that that company does not have a fixed 
establishment in Poland. 
The authorities ultimately concluded that Dong Yang Electronics sp. z o.o. 
supplied services in the territory of Poland, and therefore these services were 
subject to VAT at the basic rate. 
2.2. Proceedings before the administrative court 
2.2.1. In its appeal to the Wojewódzki Sąd Administracyjny we Wrocławiu 
(Regional Administrative Court in Wrocław), Dong Yang Electronics sp. z o.o. 
sought the annulment of the contested decision, alleging, inter alia, an 
infringement of: 
- Article 11(1) of the EU Regulation, in conjunction with Article 13(3) of the 
Law on Freedom of Commercial Activity, by issuing a decision in which the 
lawful presence in Poland of a Korean company (an entity established outside the 
territory of the European Union) in a form compliant with the Law on Freedom of 
Commercial Activity (that is, the holding of shares in the Polish LG Display 
Polska sp. z o.o. company) is interpreted in such a manner that, under VAT 
provisions, conclusions are drawn from circumstances which could not have 
arisen under the Law on Freedom of Commercial Activity, namely, from the 
alleged conduct of business by LG Display Co. Ltd using a fixed establishment, 
which LG Display Polska is alleged to constitute in that decision; 
- Article 11(1) of the EU Regulation, by incorrectly finding that LG Display 
Polska is a fixed establishment of LG Display Co. Ltd (Korea) (the party’s service 
recipient) under circumstances in which, even if the concept of fixed 
establishment were applied to the Korean undertaking, the conditions for 
determining that a fixed establishment exists are not met, namely, there is no basis 
on which to conclude that LG Display Co. Ltd (Korea) maintains technical and 
human resources characterised by permanence in Poland, and it is also impossible 
to claim that LG Display Polska receives and uses the services supplied by Dong 
Yang Electronics sp. z o.o. for its own purposes; 
[Or. 8] - Article 28b(1) and (2) of the VAT Law and Article 44 of Directive 
2006/112/EC, by erroneously assuming that Dong Yang Electronics sp. z o.o. had 
allegedly incorrectly determined the place of supply of services to LG Display Co. 
Ltd (Korea), namely, that it had assumed that this place was not in Poland and, 
consequently, had issued to LG Display Co. Ltd (Korea) invoices which did not 
include the 23% VAT due, whereas the party’s services were in fact supplied to a 
taxable person without a seat or fixed establishment in Poland, and the place of 
their supply should have been deemed to be the country of establishment of the 
service recipient, namely, South Korea; 
DONG YANG ELECTRONICS 
 
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- Articles 21 and 22 of the EU Regulation, by taking the view that those 
provisions applied to the company, whereas they apply to cases in which a foreign 
entity has several fixed establishments, and LG Display Co. Ltd (Korea) has just 
one such establishment in South Korea. 
2.2.2. In its response to the appeal, the tax authority moved for it to be dismissed 
and upheld the position taken in the contested decision. 
2.2.3. The court of first instance decided to refer the questions indicated in the 
operative part for a preliminary ruling to the Court of Justice of the European 
Union and stayed the proceedings in the case. 
3. Grounds for the questions referred 
[…] [Admissibility] 
3.2. Grounds for the questions referred 
3.2.1. In order to resolve the dispute in the present case, Article 44 of Directive 
2006/12/EC must be correctly interpreted in order to determine the place where 
Dong Yang Electronics sp. z o.o., established in Biskupice Podgórne, supplies 
services to LG Display Co. Ltd, established in South Korea, in the circumstances 
of the case at issue. 
3.2.2. In the opinion of the referring court, the case-law of the Court of Justice of 
the European Union concerning the interpretation of ‘fixed establishment’ has not 
to date provided a clear answer to the above question. In its judgment of 2 May 
1996, Faaborg-Gelting Linien (C-231/94, [Or. 9], EU:C:1996:184), the Court 
held that a vessel on board which meals are supplied is not a fixed establishment 
for these purposes. The cooperation in question must also take the concrete form 
of the presence of human and material resources. In other words, in order to 
conclude that the particular place where services are supplied is of a fixed nature, 
it is necessary for technical infrastructure (if required in order to supply the 
services) and human resources to be present there. In its case-law, the Court took 
the view that such human and technical resources in a fixed establishment must 
operate on a permanent basis, that is to say, repeatedly and continuously. For that 
reason, the Court held in its judgment of [4 July 1985], Berkholz ([168/84], 
EU:C:1985:299), that a vessel on board which ‘self-service’ gaming machines are 
installed, which are not operated by any personnel during voyages, is not a fixed 
establishment. 
The definition of a fixed establishment is further developed in the Court’s 
judgment of 17 July 1997, ARO Lease ([C-190/95], EU:C:1997:374). In that 
judgment, the Court emphasised that a place where services are actually supplied 
is not a fixed establishment if no tangible premises are present in that place (for 
example, an office) and there are no service personnel there. In that judgment, the 
Court held that the fact that a leasing company leases cars within the territory of 
Belgium does not mean that it has a fixed establishment in Belgium if it does not 
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have any office or any premises within which to store the cars there, since the firm 
has established its business in the Netherlands and the leasing agreements were 
also signed in the Netherlands. 
In the opinion of the referring court, it follows from the foregoing judgments of 
the Court of Justice of the European Union that a fixed establishment must, inter 
alia, have an appropriate structure in the form of human and technical resources. 
In a fixed establishment, an entity must therefore have personnel and technical 
facilities. Those human and technical resources must be appropriate to enable the 
entity to receive and utilise services for its own needs or to supply services, 
respectively. In order for such a place to be recognised as a fixed establishment, 
two requirements must be met: the presence of personnel and the presence of 
technical resources. This interpretation of the concept of a ‘fixed establishment’ 
also follows from the wording of Article 11(1) of the EU Regulation. 
Also in its judgment of 16 October 2014, Welmory (C-605/12, EU:C:2014:2298), 
the Court found that a first taxable person who has established his business 
[Or. 10] in one Member State, and receives services supplied by a second taxable 
person established in another Member State, must be regarded as having a ‘fixed 
establishment’ within the meaning of Article 44 of Directive 2006/12/EC in that 
other Member State, for the purpose of determining the place of taxation of those 
services, if that establishment is characterised by a sufficient degree of 
permanence and a suitable structure in terms of human and technical resources to 
enable it to receive the services supplied to it and use them for its business. 
A similar approach is to be found in Polish case-law and legal literature. 
For example, in its judgment of 30 September 2009, the Wojewódzki Sąd 
Administracyjny w Olsztynie (Regional Administrative Court in Olsztyn, Poland) 
[…] found that an undertaking has a fixed establishment within the territory of the 
country where, by utilising infrastructure and personnel within the territory of that 
country on an organised and continuous basis, it conducts business in the course 
of which it carries out transactions which are subject to VAT. The use of technical 
infrastructure and personnel must be closely linked to the performance of the 
activities subject to VAT. 
Whether the resources available at the given place are adequate for the 
performance of specific services has to be assessed on a case-by-case basis. The 
resources and means must be appropriate to enable the undertaking to receive and 
utilise the services purchased or to supply services […] [reference to the legal 
literature]. 
3.2.3. At the same time, in its judgment of 16 October 2014, Welmory 
([C-605/12], EU:C:2014:2298), the Court stressed that ‘the most appropriate, and 
thus the primary, point of reference for determining the place of supply of services 
for tax purposes is the place where the taxable person has established his business. 
… Despite its particular character, such a business requires at least a structure that 
DONG YANG ELECTRONICS 
 
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is appropriate in terms especially of human and technical resources, such as 
appropriate computer equipment, servers and software. 
It is only if that place of business does not lead to a rational result or creates a 
conflict with another Member State that another establishment may come into 
consideration.’ 
[Or. 11] 3.2.4. Meanwhile, the facts of the present case differ significantly 
from those referred to in the judgments cited above. As an entity established 
outside the European Union, LG Display Co. Ltd (Korea) does not enjoy Treaty 
freedoms and may not freely pursue its business in the territory of the Member 
States, including Poland. Therefore, many of the arguments put forward in those 
judgments cannot be applied to an entity such as LG Display Co. Ltd (Korea). 
The freedoms of the European Union, including without limitation the free 
movement of services or the freedom of establishment (which allows undertakings 
from one Member State to operate in the territory of another Member State 
without being obliged to register), have made it important to separate the place 
where services are taxed from the place where the business is established and to 
tax services in places which are similar to an establishment in terms of their nature 
(if the service recipient’s business is carried out in those places). In many cases, 
however, the freedom of establishment in the European Union leads to concepts 
such as the place where a taxable person is established or the place where it is 
present in another country becoming blurred. In exceptional cases, it may even be 
the case that a taxable person’s direct presence on a given market is difficult to 
distinguish from the presence of that undertaking through another entity (as a 
separate taxable person under VAT). 
The foregoing does not alter the general principle, which remains that a service is 
subject to VAT at the place where the service recipient is established. Therefore, 
the EU Regulation stresses that its provisions related to the fixed establishment 
need to be applied carefully, only in cases where the application of the regulation 
is necessary to ensure uniform and fair tax treatment; it is pointed out that ‘in view 
of their formulation, [these provisions] are to be applied restrictively’. 
The purpose of concepts such as the seat of a related entity being construed as a 
fixed establishment is to maintain a level playing field between undertakings, as in 
the Court’s judgment of [2 May 1996], [Faaborg-Gelting Linien] (C-231/94, 
EU:C:1996:184), or to prevent the emergence of solutions (with respect to the 
supply of services) the aim of which is to achieve an unreasonable tax treatment 
with respect to VAT (cf. Court judgments in, inter alia, Welmory (C-605/12, 
EU:C:2014:2298), Berkholz ([168/84], EU:C:1985:299) and Faaborg-Gelting 
Linien (C-231/94, EU:C:1996:184)). 
[Or. 12] For an undertaking which does not enjoy Treaty freedoms, it is in fact 
only possible to engage in business within a Member State of the European Union 
by owning a subsidiary that is a company. In this case it is clear that, to a certain 
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extent, such an undertaking is always able to influence the activities of that 
company by virtue of its ownership rights. Thus, to some extent, the subsidiary’s 
technical and human resources are at its disposal. The subsidiary is also usually 
linked to its parent company by numerous agreements and serves the purpose of 
achieving the parent company’s economic objectives, since that was the point of 
its establishment. At the same time, such an undertaking is unable to pursue its 
economic objectives in the territory of a Member State in any other form. 
3.2.5. Having concluded as set out above, the first-instance court has justified 
doubts as to whether the definition of a fixed establishment for VAT purposes 
cannot, on the other hand, be regarded as an attempt to circumvent the prohibition 
on the direct conduct of business activity by an undertaking established outside 
the [European Union]. 
At the same time, in order to ensure the coherence of the regulations indicated at 
the beginning, it would be possible to adopt a concept according to which, owing 
to the aforementioned relationships and the objectives of establishing subsidiaries, 
a subsidiary would always be considered a fixed establishment for VAT purposes. 
3.2.6. Further, it is necessary to consider whether, if it is accepted that a 
subsidiary may or may not be a fixed establishment (in the factual circumstances 
described in the present case), the supplier (the party in the main proceedings) is 
realistically able to examine whether such an establishment is present. In 
particular, does the mere fact that the materials used to supply the service are 
provided to, and received from, the supplier by a subsidiary determine the nature 
and use of the service supplied? 
It should be noted that the supplier (the party in the main proceedings) is an 
independent entity, which is bound only by its agreement with LG Display Co. 
Ltd (Korea). However, it does not have any relationship with the subsidiary in 
Poland. Therefore, doubts arise as to how, using objective and available data, the 
supplier can establish whether a fixed establishment of the service recipient exists 
which is separate from its place of establishment. The supplier (the Party in the 
main proceedings) concluded an agreement with LG Display Co. Ltd (Korea) and 
that was the company which made payments. At the same time, LG Display Co. 
Ltd (Korea) is registered for VAT purposes in Poland and has [Or. 13] a tax 
representative other than its subsidiary. The amount of materials required for the 
service to be performed is agreed directly with the customer, while the demand for 
daily deliveries of processed components is determined by the subsidiary on the 
basis of its arrangements made with the customer. 
It should be stressed that the tax authorities made their findings regarding the 
fixed establishment by, inter alia, examining the cooperation agreements 
concluded between LG Display Co. Ltd (Korea) and its subsidiary. Those data 
were collected in the course of other tax proceedings and were not available to 
Dong Yang Electronics sp. z o.o. at the time when the services were supplied (the 
invoices were issued). Since it was necessary to refer to such information in order 
DONG YANG ELECTRONICS 
 
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to assess whether the service was supplied to a fixed establishment, it appears that 
the situation described in the third subparagraph of Article 22(1) of the EU 
Regulation applies. 
3.2.7. In the opinion of the present court, the case-law of the Court of Justice to 
date concerning the interpretation of the concept of ‘fixed establishment’ does not 
remove its interpretative doubts expressed in the question being referred. The 
Court’s reply will determine whether the services supplied by the applicant, a 
Polish company, to a Korean company should be taxed in Poland or whether those 
services should be exempt from tax while the right to deduct input tax is retained. 
[…] [relevance to the resolution of the case] 
[…] [staying of proceedings] 
[…]