A Polish entrepreneur runs a handyman business and carries out renovation, plastering and painting work in the Netherlands. He divides his time between Poland and the Netherlands: two weeks there, three weeks here. The tax inspector issued additional tax assessments for 2017 and 2018 and a tax assessment for 2019. The entrepreneur argues that he does not have a permanent establishment in the Netherlands and that the profit is therefore not taxable in the Netherlands.
Residing in Poland, working in the Netherlands
The entrepreneur lives in Poland but has been registered at various addresses in the Netherlands for many years. The entrepreneur and the tax inspector agree that, under the tax treaty, Poland is considered the country of residence. The question is whether the Netherlands is entitled to tax the profits from the work carried out here.
A home is a permanent establishment
The court rules that the Dutch residence where the entrepreneur is staying constitutes a fixed establishment. The entrepreneur is the only person working for the company. During his stay in the Netherlands, he not only carries out jobs, but also meets with clients, prepares quotations and concludes contracts. The court considers it plausible that work such as client contact and bookkeeping is carried out at the residence.
A sole trader may represent themselves
The entrepreneur argues that a sole trader cannot grant authorisation to itself and that, therefore, Article 5(5) of the tax treaty cannot apply. The court rejects this argument. The purpose and scope of the provision is that a permanent establishment exists where a person is legally authorised to act on behalf of the business and to bind the business. The court considers that an interpretation whereby only an employee or a third party would constitute a permanent establishment, but not the entrepreneur himself, is not consistent with this purpose.