The French Supreme Court issued a decision on 4 April 2018, concluding that a permanent establishment (PE) existed in France for purposes of determining nonresident companies’ exposure to French VAT in a case involving a transport commissionaire arrangement. The decisions clarify the criteria for determining whether a service provider will be considered to have sufficient substance in France to enable the services to be performed in an independent manner, and thus constitute a PE.
A UK sea carriage commissionaire signed a client assignment contract with a French company carrying out the same activity, as well as a contract for the French company to organize and provide transport services. The UK company was required to approve any new clients or suppliers. The UK company also managed the reservation systems for clients to book the transport and communicated with the clients regarding the transport and the insurance linked to the business. The French company was responsible for the overall development of the business through identifying new clients, and it physically organized the transport services. The French company had the authority to negotiate independently with clients and suppliers in the name of the UK company, including the negotiation of prices. For this purpose, the company had three offices in France with customer service personnel to receive orders and organize the transport services, as well as a sales department.
The Supreme Court concluded that the French company had sufficient human and technical resources to provide the transport commissionaire services. Accordingly, the court held the that the UK company had a PE in France, even though the company had no means of providing the transport services on its own, since the transport services were organized and carried out independently by the French company.
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