AI Companies & VAT: Taxing Zero-Person Businesses

The increasing sophistication of artificial intelligence has introduced the concept of ‘zero-person companies,’ where AI agents autonomously manage all operational tasks, ranging from planning to sales, without the need for direct human oversight. Researchers at KPMG and the University of Amsterdam have already demonstrated the technical feasibility of this model through an experiment involving an online business selling AI-generated art.

This development raises significant questions from a tax perspective, especially concerning Value Added Tax (VAT). Despite their name, zero-person companies cannot exist entirely without human involvement. Corporate law necessitates a human link—such as a director, founder, or ultimate beneficial owner—to ensure legal accountability. AI agents are viewed as tools performing tasks on behalf of the entity, similar to vending machines in a beverage company. Their operational role does not alter the fundamental principle that the company itself conducts the economic activity.

A primary challenge for VAT is determining the ‘place of establishment.’ Under EU regulations, this refers to where central administration functions are carried out, typically identified by the registered office, management meeting locations, and where key decisions are made. For AI-operated companies, pinpointing a physical location for central administration becomes problematic because AI agents often operate through distributed cloud infrastructure without a meaningful geographic presence.

In these instances, the registered office might serve as the primary indicator. However, EU case law, such as the *Planzer* case, suggests that a registered office lacking actual management activity may not suffice. Consequently, tax authorities might investigate the location of human founders or directors to ascertain where central administration effectively occurs.

The question of whether a zero-person company could establish ‘fixed establishments’ in other countries where its systems operate also arises. EU regulations stipulate a sufficient degree of permanence and suitable human and technical resources for a fixed establishment. The Court of Justice of the European Union has consistently maintained that technical infrastructure alone is generally insufficient without personnel in that jurisdiction. Thus, cloud infrastructure or automated systems in various countries are unlikely to create fixed establishments on their own, although a human founder’s presence in another country could alter this assessment.

While many aspects of VAT compliance can be automated, tax systems still presume a human counterpart for accountability. Tax authorities require human responses to information requests, audits, and explanations of transactions. As such, a completely human-free company remains theoretical, as the legal framework of VAT still relies on identifiable human actors to assume responsibility for tax obligations.