Dutch Court of 's-Hertogenbosch recently ruled a rented apartment qualifies as a permanent establishment for VAT.
The business activities of the German entrepreneur consist of the supervision of DNA testing via websites (paternity tests where permission from the mother is not necessary).
The DNA tests are performed in Australia. Because the paternity tests without permission from the mother are not longer permitted in Germany, from the end of 2010 the German entrepreneur rents an apartment in the Netherlands, which is furnished as an office.
What is the place of supply for VAT-purposes of these services provided by the German entrepreneur?
The Court of 's-Hertogenbosch judges that the rented apartment qualifies as a permanent establishment for VAT from which the German entrepreneur provides his services.
According to the court, the German entrepreneur has a facility in the Netherlands that has a sufficient degree of substance and permanence and, in terms of personnel and technical resources, a suitable structure to be able to provide the services. It is irrelevant whether the immovable property in the Netherlands was rented or purchased, and that the company of the German entrepreneur is only a sole proprietorship.
The Dutch VAT assessment is correct.