VAT/GST: fixed establishment in the digital age

Managing indirect taxes in the digital age

Fixed establishment for VAT/GST

When a company does business cross-border, what are its obligations and rights in the foreign jurisdictions where it operates? Often, the answer depends on whether it is treated as an established or non-established entity. For taxes on consumption — such as value-added tax (VAT) and goods and services tax (GST) — one important test is whether the foreign entity has a fixed establishment (FE). While the FE concept is similar to the well-known permanent establishment (PE) concept for direct taxes, important differences apply.

Increasingly, companies that do business in multiple locations need to be aware of how FE is defined for VAT/GST purposes, what their VAT/GST obligations are, and how different definitions of “establishment” used for VAT/GST and for direct tax purposes may interact and develop to respond to the challenges of doing business cross-border in a digital world.

Our 2016 VAT/GST fixed establishment survey

In 2016, we surveyed EY Indirect Tax professionals in 67 countries and asked them how the term “fixed establishment” for VAT/GST is defined in their local tax legislation, whether the concept of FE for VAT/GST is aligned with the concept of permanent establishment for direct taxes in their countries and whether the current definition of FE is under review as a result of projects such as the Base Erosion and Profit Shifting (BEPS) Actions or Court of Justice of the European Union (CJEU) case law.

Read the detailed survey results for more information.

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