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Place of performance for VAT purposes in the case of hosting services in a data centre

The European Court of Justice (ECJ) recently considered the issue of the VAT treatment of hosting services in a data centre. The issue was whether or not the location of the property should be regarded as the place of performance.

A company based in Finland provided hosting services for telecommunications networks operators. In this respect, it made lockable equipment cabinets available. The scope of services likewise included a power supply, air conditioning and monitoring in order to provide an optimum operating environment for the servers. The cabinets where the servers were stored were bolted to the floor. It was however possible to remove the servers again within a few minutes. Customers did not have direct access to their cabinets but, instead, were given keys to them after completing identity checks.

The point at issue between the parties involved was whether or not making equipment cabinets available for use should be treated as VAT-exempt leasing or letting of immovable property or as a VATable service connected with immovable property. Another issue related to the question of where the place of performance would be – thus in Finland or the customer’s principal place of business. The ECJ, in its judgement from 2.7.2020 (case C 215/19), rejected the notion that providing the premises where the equipment cabinets were installed constituted a letting or leasing transaction since hosting services comprise not merely the provision of storage locations for equipment cabinets but also other services. Furthermore, the ECJ did not see a sufficiently direct connection between the hosting services and the property. Firstly, the services did not constitute an integral part of the building in which they had been located such that the building could have been regarded as being incomplete without them. Apart from that, the cabinets did not constitute a permanent installation as they had merely been bolted to the floor. Moreover, the ECJ rejected the notion that the hosting services should be viewed as a service connected with immovable property.

Conclusion: According to the ECJ, the place of performance would thus ultimately not be the location of the property but rather the place from which the business provides its hosting services.

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