On June 11, 2015, the ECJ issued its decision in the case C-256/14 (Lisboagás GDL).
Context: References for a preliminary ruling — Value added tax (VAT) — Directive 2006/112/EC — Articles 9, 73, 78, first paragraph, point (a), and 79, first paragraph, point (c) — Taxable amount — Inclusion of the amount of municipal land use taxes paid by the company holding the concession for the gas distribution network in the taxable amount for VAT applicable to supplies of services made by that company to the company responsible for marketing the gas
Article in the EU VAT Directive
Articles 9, 73, 78, first paragraph, point (a), and 79, first paragraph, point (c) of the EU VAT Directive 2006/112/EC
Article 9 (Taxable person)
1. “Taxable person” shall mean any person who, independently, carries out in any place any economic activity, whatever the purpose or results of that activity.
Any activity of producers, traders or persons supplying services, including mining and agricultural activities and activities of the professions, shall be regarded as “economic activity”. The exploitation of tangible or intangible property for the purposes of obtaining income therefrom on a continuing basis shall in particular be regarded as an economic activity.
2. In addition to the persons referred to in paragraph 1, any person who, on an occasional basis, supplies a new means of transport, which is dispatched or transported to the customer by the vendor or the customer, or on behalf of the vendor or the customer, to a destination outside the territory of a Member State but within the territory of the Community, shall be regarded as a taxable person.
Article 73 (Taxable amount)
In respect of the supply of goods or services, other than as referred to in Articles 74 to 77, the taxable amount shall include everything which constitutes consideration obtained or to be obtained by the supplier, in return for the supply, from the customer or a third party, including subsidies directly linked to the price of the supply.
Article 78 (Taxable amount)
The taxable amount shall include the following factors:
(a) taxes, duties, levies and charges, excluding the VAT itself;
Article 79 (Taxable amount)
The taxable amount shall not include the following factors:
(c) amounts received by a taxable person from the customer, as repayment of expenditure incurred in the name and on behalf of the customer, and entered in his books in a suspense account.
- Lisboagás is the company holding the exclusive concession for the public service regional gas distribution network in municipilities in the region of Lisbon (Portugal), responsible, in particular, for the development, operation and maintenance of the distribution network. As the natural gas distribution network comprises, in particular, pipes which are installed on the publicly-owned property of certain municipalities situated in the concession area, Lisboagás is obliged to pay the land use taxes imposed by those municipalities.
- In accordance with the concession agreement, Lisboagás, after having paid the land use taxes to the municipalities, passes on the amount of those taxes to the company responsible for marketing gas in the concession area when it bills that company for the use of the network infrastructures for supplying gas to consumers. That company then passes on the amount of land use taxes to consumers in their gas supply bill.
- Following the instructions of the tax authorities, Lisboagás self-assessed VAT at the standard rate of 23% on the land use tax amounts, which were subsequently passed on to consumers in May, June and July 2012. It included that VAT in the relevant regular VAT returns and paid it in a timely manner.
- Following the dismissal of its complaint seeking recovery of the VAT, on 29 April 2013 Lisboagás brought an action before the Tribunal Arbitral Tributário (Centro de Arbitragem Administrativa — CAAD) (Arbitration Tribunal, Centre for Administrative Arbitration).
- In support of that action, Lisboagás submits, inter alia, that the passing on of the land use taxes does not constitute an ‘economic activity’ within the meaning of Article 9(1) of the VAT Directive since there is no direct or indirect compensation, with the result that, as a transaction involving no consideration, it does not create added value.
- Lisboagás further states that point (a) of the first paragraph of Article 78 of the VAT Directive, transposed by Article 16(5)(a) of the CIVA, is (i) not applicable to land use taxes, since they are not directly linked to the taxable transactions carried out by it, (ii) the land use taxes are not linked to the pursuance of the activity covered by the concession agreement, and (iii) in particular, that their collection does not represent actual compensation for a taxable transaction carried out by it for the entity which markets the gas.
- It adds that since land use taxes fall outside the scope of VAT when the municipalities collect them under Article 2 of the CIVA, the act of simply passing them on without any additional amount cannot lead to their inclusion in the taxable amount for VAT. The principle of VAT neutrality requires that the VAT treatment of a given cost be maintained when the exact amount of the cost is re-billed to a third party.
- The Autoridade Tributária e Aduaneira states that repaying Lisboagás the amount of the VAT which it assessed and collected from its customer would amount to unjust enrichment which national law and EU law do not allow.
- It further observes that the use or utilisation of publicly-owned property entails an act of consumption which, for the purposes of VAT, is equivalent to the supply of services and that it cannot be argued that the payment of the land use tax has no direct relationship with Lisboagás’s taxable transactions, since gas distribution is carried out through land in a particular district or municipality.
- It considers that, although the charging of the land use taxes is not subject to VAT in so far as granting the concession in respect of publicly-owned property is done by the municipalities in the exercise of their public powers, the passing-on of the tax assessed by a legal person governed by private law, by contrast, forms part of a supply of services which culminates in the supply of gas to consumers.
Does EU law preclude the assessment of VAT, when a private undertaking providing infrastructures for the distribution of natural gas passes on to an undertaking acquiring its services, without including any additional amount, the amounts relating to land use taxes paid to the municipalities in which the pipes comprising those infrastructures are located?
Given that local authorities assess land use taxes in the exercise of their public powers, without including VAT, does EU law preclude the assessment of VAT when the amounts relating to those taxes paid by a private undertaking providing infrastructures for the distribution of natural gas are passed on to an undertaking acquiring its services?
Articles 9(1) and 73, point (a) of the first paragraph of Article 78 and point (c) of the first paragraph of Article 79 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax must be interpreted as meaning that the amount of taxes, such as those at issue in the main proceedings, which is paid to municipalities by the company holding the gas distribution concession in return for the use of publicly-owned property belonging to those municipalities and which is then passed on by that company to another company responsible for marketing the gas, then by that company on to the final consumers, must be included in the taxable amount for value added tax applicable to the supply of services effected by the first company to the second company under Article 73 of that directive.
The amount of taxes paid by the concessionaire of the gas distribution network to the municipalities for the use of the public domain of those municipalities and which is subsequently passed on by that company to another company responsible for the sale of gas and subsequently by the latter to the consumer, must be included in the taxable amount for the VAT applicable to the supply of services from the first to the second of those undertakings.