Supreme Court rules that marketing services do not create VAT fixed establishment | Our tax litigation team overturns previous Court’s case law

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Alex Karopoulos

Alex Karopoulos

Partner

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Dimitris Gialouris

Dimitris Gialouris

Partner

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Evangelia Yotakou

Evangelia Yotakou

Senior Associate

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George Vlachakis

George Vlachakis

Associate

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Our tax litigation team has succeeded in annulling before the Supreme Court multi-million VAT assessments made by tax authorities, who had argued that marketing services provided by a Greek subsidiary to a foreign affiliated company had created a fixed establishment for the foreign company. In this context, they had assessed VAT on the service fees of the Greek subsidiary on the basis that they should have been invoiced to the Greek fixed establishment of the foreign affiliate and therefore be subject to Greek VAT.

On the matter of fixed establishment, Greek Supreme Court had consistently ruled in the past, contrary to relevant CJEU case law, that fixed establishment may be created even when the human and technical resources of a Greek subsidiary provide only ancillary services to a foreign affiliate that are necessary for the performance of the foreign entity’s main activity.

However in the cases handled by our tax litigation team, the Supreme Court, accepting our relevant argumentation, wholly reversed its position and narrowed its definition of fixed establishment, ruling that the human and technical resources of the Greek subsidiary should be placed at the disposal of the foreign entity, in order to perform the latter’s main activity in Greece, thus removing ancillary services from the definition of fixed establishment. Therefore, marketing services provided by a Greek subsidiary do not create a fixed establishment for the foreign recipient entity.

The decisions of the Supreme Court are of great importance, since the broad interpretation of fixed establishment adopted until now by the Supreme Court, had created ambiguity as to the VAT treatment of structures involving the provision of services by Greek subsidiaries, usually on a cost plus basis and had resulted in big VAT assessments.

Our team was led by Alex Karopoulos, partner and leader of our tax controversy & litigation practice, with the assistance of Dimitris Gialouris, partner, Eva Yotakou, senior associate and George Vlachakis, associate.