On June 20, 2013, the ECJ issued its decision in the case C-219/12 (Finanzamt Freistadt Rohrbach Urfahr).
Context: Sixth VAT Directive – Article 4(1) and (2) – Concept of ‘economic activities’ – Deduction of input tax – Operation of a photovoltaic installation on the roof of a house which is used as a dwelling – Supply to the network – Remuneration – Electricity production lower than consumption
Article in the EU VAT Directive
Article 2 – also Title II – of the Sixth Directive, entitled ‘Scope’, was worded as follows:
‘The following shall be subject to [VAT]:
1. the supply of goods or services effected for consideration within the territory of the country by a taxable person acting as such;
Article 4(1) and (2) of the Sixth Directive provided:
- 1. “Taxable person” shall mean any person who independently carries out in any place any economic activity specified in paragraph 2, whatever the purpose or results of that activity.
- 2. The economic activities referred to in paragraph 1 shall comprise all activities of producers, traders and persons supplying services including mining and agricultural activities and activities of the professions. The exploitation of tangible or intangible property for the purpose of obtaining income therefrom on a continuing basis shall also be considered an economic activity.’
Under Article 5(1) and (2) of the Sixth Directive:
- 1. “Supply of goods” shall mean the transfer of the right to dispose of tangible property as owner.
- 2. Electric current … and the like shall be considered tangible property.’
Article 17 of the Sixth Directive, as amended by Article 28f thereof, provided:
- 1. The right to deduct shall arise at the time when the deductible tax becomes chargeable.
- 2. In so far as the goods and services are used for the purposes of his taxable transactions, the taxable person shall be entitled to deduct from the tax which he is liable to pay:
- (a) [VAT] due or paid within the territory of the country in respect of goods or services supplied or to be supplied to him by another taxable person;
Facts
- In 2005 Mr Fuchs had a photovoltaic installation fitted on the roof of his house, which he uses as a dwelling, at a cost of EUR 38 367.76; this attracted a one-off grant of EUR 19 020.
- The installation has no storage capacity and the whole of the electricity produced thereby is supplied to the network on the basis of a contract, granting access to that network, which has been in force since 1 July 2005 and was concluded for an indefinite duration with the company Ökostrom Solarpartner (Ö Vertriebs‑GmbH). The consideration for that supply is the market price, that is, EUR 0.181 per kWh, and subjected to VAT. Such electricity as is necessary to meet Mr Fuchs’s household needs is bought back from the company at the same price as the price of the supply.
- During the period from 2005 to 2008, Mr Fuchs took 44 600 kWh from the network to cover his household needs. He supplied 11 156 kWh on a continuing basis to the network and directly consumed 8 645 kWh therefrom. He thus fed into the network the whole of the electricity produced by his photovoltaic installation, namely 19 801 kWh.
- In that regard, following a request for clarification made in accordance with Article 101 of the Rules of Procedure of the Court of Justice, the Verwaltungsgerichtshof (Administrative Court) stated, in a decision of 10 January 2013 received at the Court on 28 January 2013, relying on a finding of fact by the appeal tribunal, that the concept of electricity ‘directly’ consumed had to be understood as meaning that that electricity had been taken from the public network either as soon as or soon after it had been fed into that network.
- Mr Fuchs applied for reimbursement of input VAT in the amount of EUR 6 394.63 in connection with his purchase of the photovoltaic installation.
- The Finanzamt took the view that Mr Fuchs was not entitled to deduct the input VAT on the ground that he had not carried out any economic activity by operating his photovoltaic installation. Mr Fuchs brought an appeal against that decision before the Unabhängiger Finanzsenat Außenstelle Linz, claiming that he was carrying out an economic activity as defined in Article 4(1) and (2) of the Sixth Directive.
Questions
Is the operation of a network-connected photovoltaic installation with no independent power storage capability on or adjacent to a privately owned house used for private residential purposes, which is technically designed such that the power generated by the installation is, on a continuing basis, below the total quantity of power privately consumed by the installation operator in the privately owned house, an ‘economic activity’ of the installation operator within the meaning of Article 4 of the Sixth Directive 77/388/EEC?
AG Opinion
The operation of a network-connected photovoltaic installation on or adjacent to a privately owned house used for private residential purposes constitutes an economic activity within the meaning of Article 4 of Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes – Common system of value added tax: uniform basis of assessment, to the extent that electricity produced by the installation is supplied to the network for consideration. In such circumstances, input tax paid on the acquisition of the installation may be deducted from output tax charged on the supply of electricity to the network, subject to all the provisions of that directive which govern such deduction.
Decision
Article 4(1) and (2) of Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes – Common system of value added tax: uniform basis of assessment, as amended by Council Directive 95/7/EC of 10 April 1995, must be interpreted as meaning that the operation of a photovoltaic installation on or adjacent to a house which is used as a dwelling, which is designed such that the electricity produced is (i) always less than the electricity privately consumed by its operator and (ii) supplied to the network in exchange for income on a continuing basis, falls within the concept of ‘economic activities’ as defined in that Article.
Summary
Article 4(1) and (2) of the Sixth Directive must be interpreted as meaning that the operation of solar panels on or near a dwelling, which is designed in such a way that the amount of electricity produced is always less than the total amount consumed by the occupant for private purposes electricity and is supplied to the electricity grid in exchange for a sustainable return, falls under the concept of ‘economic activities’.
Source
How did countries implement the case?
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