Dutch court: German firm based in Dutch apartment liable for VAT

A German entrepreneur whose business operates out of a rented apartment in Holland is liable for VAT, a Dutch court has ruled.

The entrepreneur runs a web-based paternity testing service. In his native Germany, where paternity tests require the consent of the child’s mother, the business is illegal. In order to circumvent German law, the business operates from premises in the Netherlands – the DNA tests themselves are performed in Australia.

The Court of 's-Hertogenbosch rules that the rented apartment qualifies as a permanent establishment for VAT purposes.

According to the court, the facility has a sufficient degree of substance and permanence, and in terms of personnel and technical resources, provides a suitable structure to provide the business’ 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.

Author: Pieter Tielemans, HLB Netherlands, HLB Van Daal