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ECJ Case Law on Article 9(1) of the EU VAT Directive 2006/112/EC
The concept of “taxable person” – analysis and case overview
Status: 28 September 2026 | Sources: VATupdate.com and EUR-Lex
- Relevant article in the EU VAT Directive
Article 9(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.
Article 9(1) is read together with Article 10 (the “independently” condition excludes employees and persons in an employer–employee relationship), Article 11 (VAT grouping) and Article 13 (public bodies acting as public authorities). Most of the case law below applies these provisions as a single framework. Judgments given under Article 4 of the Sixth Directive 77/388/EEC apply equally, as Article 9 takes over that text.
- Executive summary
The Court gives Article 9(1) a very broad, objective and EU-autonomous reading. “Any person” covers natural and legal persons, public and private, and entities without legal personality. Status does not depend on registration, licences, turnover thresholds, profit or national civil-law form. Two tests do almost all the work in the case law. The first is independence: acting in one’s own name, for one’s own account and under one’s own responsibility, and bearing the economic risk. The second is economic activity: a continuing activity carried out for consideration, in a way comparable to how the activity is usually carried out on the market, as opposed to the mere exercise of ownership or management of private assets.
The recent cases (2023–2026) confirm this line and apply it to new situations. Board members are not independent (C-288/22). Partnerships and spouses’ joint ownership can be the taxable person, but only where they act as such towards third parties (C-213/24, C-796/23). Private land sales become taxable once trader-like marketing steps are taken, even through an agent (C-213/24). National turnover thresholds cannot remove taxable-person status (C-341/22). Publicly funded municipal programmes where residents pay little or nothing are not economic activities (C-612/21, C-616/21). However, a public-law association supplying services to its members for consideration is taxable (T-575/24, a General Court preliminary ruling).
- Analysis by theme
3.1 “Any person” – legal form is irrelevant, economic reality decides
The Court looks past civil-law form. A partner in a joint-activity agreement who alone deals with third parties in his own name is the taxable person and the sole VAT debtor (C-312/19). Spouses’ statutory joint ownership can be the taxable person where the spouses sell together and the joint ownership bears the risk (C-213/24). Spouses farming separately can instead be two taxable persons (C-697/20). The key point from C-796/23 (Česká síť) is that a Member State cannot use a civil-law “partnership” construction to make one “designated partner” liable for VAT on supplies that other partners made in their own name. VAT liability follows the entity that actually supplies and bears the risk. Earlier, C-340/15 (Nigl) held that closely linked family partnerships remain separate taxable persons where each acts independently. Merging them into one taxable person requires a proper Article 11 VAT group. C-280/10 (Polski Trawertyn) and C-519/21 (DGRFP Cluj) add that fiscal neutrality protects the right to deduct where the taxable entity is formed after, or differs from, the person who incurred the costs.
3.2 “Independently” – directors, supervisory board members, branches and public units
Independence is tested on three criteria: own name, own account and own responsibility, and economic risk. A salaried sole director in subordination (C-355/06), a supervisory board member with fixed remuneration (C-420/18) and a member of a collegiate board of directors of a Luxembourg SA (C-288/22) all fail the test, because they act on behalf of and under the responsibility of the board and bear no risk of their own. By contrast, a partner who lets property to his partnership is independent (C-23/98). Municipal budgetary units are not separate taxable persons, because the municipality carries the risk (C-276/14). For head offices and branches, the principle is unity: a non-independent branch is part of the same taxable person, and internal supplies are out of scope (C-210/04 FCE Bank). That unity is broken once a VAT group intervenes, in either direction: C-7/13 Skandia (the branch is in the group) and C-812/19 Danske Bank (the head office is in the group).
3.3 “Economic activity” – exploitation of property versus management of private assets
Exploiting tangible or intangible property on a continuing basis is an economic activity. Examples are granting building rights (C-186/89 Van Tiem) and selling timber from a private forest (C-263/11 Rēdlihs). Where assets can be used both privately and commercially, all the circumstances are compared with how the activity is normally carried out (C-230/94 Enkler, see section 6). For sales of land, the dividing line has been constant since C-180/10 & C-181/10 (Słaby, Kuć). Selling private assets is not an economic activity unless the seller takes active marketing steps using means similar to those of a producer, trader or service provider, such as subdividing, rezoning, installing utilities or advertising. C-213/24 (Grzera) confirms that those steps count even when a professional agent carries them out and the owner keeps the economic risk. C-655/19 (LN) shows the opposite case: acquiring and reselling property in enforcement to recover a debt is mere asset management. Where the owner is already a taxable person acting as such, the analysis changes. A farmer’s land expropriated against compensation is a taxable supply even without marketing steps (C-182/23 Makowit). Formally allocating land to private assets does not prevent the sale being made “as a taxable person” (C-331/14 Trgovina Prizma). Once someone is a taxable person, occasional additional activities are also covered (C-62/12 Kostov). Preparatory acts are part of the economic activity from the first investment (C-268/83 Rompelman), provided the intention is supported by objective evidence.
3.4 Holding companies and financial assets
The line of case law from Polysar (C-60/90) to C&D Foods (C-502/17) rests on one rule: acquiring, holding and selling shares is not in itself an economic activity (C-60/90; C-155/94 Wellcome Trust; C-77/01 EDM). A holding becomes a taxable person where it gets directly or indirectly involved in managing its subsidiaries through taxable supplies, such as administrative, financial, commercial or technical services, interest-bearing loans (C-77/01) or letting a building (C-320/17 Marle). Costs of disposing of shares can be deductible as general overheads where the holding has an economic activity (C-29/08 SKF). A share sale that is only intended, with no link to taxable output, does not give a right to deduct (C-502/17). Services passed on free of charge to subsidiaries do not give a right to deduct either (C-28/16 MVM). A one-off assignment of a debt that does not go beyond managing one’s own assets falls outside Article 9 (C-692/17).
3.5 Public bodies and non-market activities
Article 9 comes before Article 13: first ask whether there is an economic activity at all, then whether the public-authority exclusion applies. There is no economic activity where the “consideration” is marginal or unrelated to the service and public funds bear the cost. Examples are school transport with small parental contributions (C-520/14 Borsele), municipal renewable-energy and asbestos programmes (C-612/21, C-616/21), a party’s political promotion (C-267/08) and a regulator auctioning spectrum rights (C-284/04 T-Mobile Austria). There is an economic activity where public or publicly owned bodies supply services under contract for remuneration on a continuing basis, even without profit or full cost recovery (C-263/15 Lajvér, C-174/14 Saudaçor, C-182/17 Nagyszénás). T-575/24 (Digipolis) applies this to Belgian intermunicipal cooperation. A commissioning association supplying ICT services to its members for consideration is a taxable person, and the national “emanation” practice that treated those supplies as internal cannot stand.
3.6 Professions
The activities of professions are expressly listed as economic activities. Lawyers supplying legal services independently for remuneration are taxable persons (C-424/19). The same applies to court-appointed guardianship mandates carried out by a lawyer on a continuing basis (C-846/19). The limit is independence, as the board-member cases show (section 3.2).
3.7 Status, registration and deduction
Taxable-person status is substantive, not formal. It is not lost through lack of registration or withdrawal of a trading licence (C-324/11 Tóth), it cannot depend on a national turnover threshold (C-341/22 Feudi di San Gregorio), and pre-registration or pre-incorporation costs remain deductible where they are linked to the planned taxable activity (C-280/10). Several cases in the list use Article 9 mainly as context for fraud, deduction or taxable-amount issues (C-512/21, C-285/11, C-576/15, C-256/14, C-146/21, C-499/13). They are useful as supporting authority rather than as leading Article 9 cases.
- Practical implications for multinational groups
- Head office/branch flows: check whether any head office or branch sits in a VAT group (Skandia, Danske Bank). If so, cross-border cost allocations and recharges become taxable supplies needing reverse charge and invoicing.
- Holding and management entities: document the holding’s active involvement through taxable intra-group services (management fees, loans, leases) to secure taxable status and deduction. Keep the cost trail for share acquisitions and disposals separate (Polysar, SKF, C&D Foods, Marle).
- Directors’ and board fees: individuals sitting on boards generally act without independence and should not charge VAT (C-288/22, C-420/18). Corporate directors and genuinely independent mandates need a case-by-case review.
- Joint ventures, consortia and partnerships: identify which entity contracts in its own name and bears the risk. Do not rely on national designated-partner or joint-liability constructs that conflict with Articles 9 and 193 (C-796/23, C-312/19).
- Public-sector counterparties: services bought from, or supplied to, municipalities and intermunicipal bodies may be within the scope of VAT despite domestic tolerance (T-575/24). Contracts and pricing should reflect this.
- Status is not formal: registration, licences and thresholds do not decide taxable status (C-341/22, C-324/11). Take this into account in supplier onboarding and in VAT ID validation under e-invoicing and ViDA.
- ECJ cases decided – summaries with links to VATupdate.com
Cases are listed in chronological order, oldest first. Each case title links to the VATupdate.com item on the judgment or decision.
- Mr and Mrs Rompelman, Dutch nationals, bought the right to future ownership of units in a building that was still under construction. They intended to let the units as showrooms to traders, and planned to opt for taxable letting. They sought a refund of the VAT paid on the instalments of the purchase price. The Dutch authorities refused, because no letting had yet taken place. The question was whether a right to deduct can exist before any taxable letting.
- In its judgment of 14 February 1985, the Court held that acquiring a right to the future transfer of property, with the intention of letting it, can be an economic activity. Preparatory acts, such as acquiring assets, are part of the economic activity from the start. The right to deduct arises immediately. However, the tax authority may require the declared intention to be supported by objective evidence, such as the premises being specifically suitable for commercial use.
- Rompelman is the foundation of the rule that investment and preparatory acts give rise to taxable-person status and immediate deduction, before any taxable output. This was later confirmed in cases such as INZO, Ghent Coal and Polski Trawertyn. Start-ups, property developers and new establishments should keep business plans, contracts and other objective evidence of their intended taxable use, as the tax authority can ask for this proof.
C-186/89 (Van Tiem) – Granting of building rights on immovable property is an economic activity
- Mr Van Tiem, a Dutch natural person, owned land and granted a company a building right (opstalrecht) over it for a fixed period, in return for an annual payment. This allowed the company to build and use structures on the land. The question was whether granting such a right in rem over immovable property, in return for periodic payments, made the owner a taxable person carrying out an economic activity.
- In its judgment of 4 December 1990, the Court held that granting a building right over immovable property to another person, for a specified period in return for consideration, is the exploitation of tangible property for the purpose of obtaining income on a continuing basis. It is therefore an economic activity. The Court also held that the concept of taxable person is defined exhaustively by the Directive and cannot be extended by national options.
- Van Tiem is a key authority for the ‘exploitation of property’ limb of Article 9(1). Granting rights of use over land or buildings for recurring income is an economic activity, even for a private individual. That activity may then be exempt as letting, or taxable if an option or special rule applies. Owners of land who grant long-term rights, such as leasehold or superficies, should consider their VAT status and possible deduction rights.
- Polysar Investments Netherlands was a Dutch holding company within a Canadian group. It held shares in companies of the group and received dividends from them, but did not supply any services to them. It claimed deduction of input VAT on services it had bought. The Dutch tax authority refused, arguing that holding shares and receiving dividends did not make Polysar a taxable person. The case concerned the basic question of whether holding shares is an economic activity.
- In its judgment of 20 June 1991, the Court held that a holding company whose sole purpose is to acquire holdings in other undertakings, without being involved directly or indirectly in their management, is not a taxable person and has no right to deduct. The mere acquisition and holding of shares is not an economic activity, and dividends are not consideration for any supply. This is without prejudice to the rights the holding has as a shareholder.
- Polysar is the foundation of the EU case law on holding companies. It distinguishes passive holdings, which are outside the scope of VAT, from active holdings that are involved in managing subsidiaries through taxable supplies. The later cases, including EDM, Cibo, SKF, MVM, Marle and C&D Foods, build on this distinction. Holding companies should decide whether they want active status, and if so supply real services for consideration and document them.
- Wellcome Trust Ltd was the trustee of a large UK charitable trust whose main asset was a shareholding in the Wellcome Foundation, a pharmaceutical company. To diversify the investments, the trustee sold a substantial part of the shares on the market and incurred significant advisory costs. It sought to recover the input VAT on those costs, arguing that its investment management was an economic activity. The UK tax authority refused, and the case was referred to the Court.
- In its judgment of 20 June 1996, the Court held that the purchase and sale of shares and other securities by a trustee managing the assets of a charitable trust is not an economic activity. The trustee was acting like a private investor managing a portfolio, not like a trader. The scale of the transactions and the use of professional advisers do not change this. The trust was also barred from trading under its governing rules.
- Wellcome Trust confirms that managing an investment portfolio, however large or sophisticated, is outside the scope of VAT. Pension funds, endowments, family offices and investment holdings that manage assets passively cannot deduct VAT on the related costs. They also do not become taxable persons because of these activities. Only where such entities carry out real commercial securities dealing, or other taxable activities, can deduction arise for the related costs.
- Mrs Enkler, a German resident, bought a motor caravan, which she hired out to third parties on some occasions and also used privately. She claimed deduction of the input VAT on the purchase and running costs, as a taxable person hiring out the vehicle. The German tax authority considered that the hiring out was too occasional to be an economic activity, and refused deduction. The question was how to distinguish economic exploitation from private use.
- In its judgment of 26 September 1996, the Court held that hiring out tangible property is exploitation of that property, and can be an economic activity. Where property can be used for both economic and private purposes, all the circumstances must be examined. The actual use must be compared with how the corresponding economic activity is usually carried out. Relevant factors include the actual period of hire, the number of customers and the amount of earnings.
- Enkler sets out the comparative test for assets that are suitable for both private and business use, such as vehicles, boats, holiday homes and equipment. The owner’s stated intention is not enough, and objective indicators of market-like use decide the question. The test remains relevant for sharing-economy and platform activities. Individuals and businesses renting out mixed-use assets should keep records of bookings, customers and income to support their VAT position.
C-23/98 (Heerma) – Letting of tangible property is an independent activity
- Mr Heerma, a Dutch farmer, was a partner with his wife in a civil-law partnership (maatschap) running a dairy farm. He personally built a cowshed and let it to the partnership, which was itself a taxable person, for a rent. He claimed deduction of the input VAT on the construction. The Dutch tax authority refused, arguing that he did not act independently of the partnership. The case concerned whether a partner can act independently towards his own partnership.
- In its judgment of 27 January 2000, the Court held that a partner who lets tangible property to a partnership that is itself a taxable person, in return for rent, carries out an economic activity independently. He acts in his own name, on his own account and at his own risk, even though he is also a partner. His role as partner does not make him an employee or remove his independence.
- Heerma confirms that partners can have a separate VAT identity for transactions with their own partnership. This is important for farming and professional partnerships where partners provide premises, equipment or services. Such arrangements can create taxable supplies and deduction rights for the partner. Where letting of immovable property is exempt, the option to tax may be needed to secure input VAT recovery. Contracts and rent should reflect a genuine commercial arrangement.
C-77/01 (EDM) – Concept of “economic activities” – Concept of ancillary “financial transactions”
- EDM, a Portuguese mining holding company that was formerly a public undertaking, supplied taxable services and also carried out financial transactions. These included selling shares, investing in funds, making interest-bearing loans to subsidiaries and placing deposits. It also took part in mining consortia, where costs were shared between members. The question was which of these activities were economic activities and how they should be treated in the deductible proportion.
- In its judgment of 29 April 2004, the Court held that the mere sale of shares and holdings in investment funds is not an economic activity. Interest-bearing loans granted by a holding to its subsidiaries can be an economic activity, although they are exempt. Such financial transactions may be ‘incidental’ and excluded from the pro rata if they involve only very limited use of assets or services subject to VAT. Sharing costs within a consortium is not a supply for consideration.
- EDM is a cornerstone for holding and treasury companies. It separates non-economic portfolio management from economic financing activities, and so affects both taxable status and the calculation of input VAT recovery. Groups with treasury centres or intra-group lending should classify each flow: share sales, dividends and passive investment are outside the scope, while loans are exempt economic activities. The ‘incidental’ test should be used carefully, taking into account the resources used.
C-210/04 (FCE Bank) – A fixed establishment is not a legal entity distinct from the business itself
- FCE Bank plc, established in the United Kingdom, operated in Italy through a branch, FCE IT. The head office supplied the Italian branch with services, such as consultancy, management, staff training and data processing, and allocated the related costs to it. The Italian tax authority treated those allocations as consideration for taxable services supplied by the UK head office to the branch. The question was whether the branch should be treated as a separate taxable person receiving services.
- In its judgment of 23 March 2006, the Court held that a fixed establishment that is not a legal entity separate from the company it belongs to, and that receives services from the head office, is not a taxable person because of the costs charged to it. Supplies between head office and branch are internal to one taxable person and outside the scope of VAT. A double taxation agreement cannot change that analysis.
- FCE Bank established the single-entity principle for head offices and branches, which is still the starting point for internal cross-border flows. Recharges, cost allocations and internal service charges between establishments of the same legal person are generally out of scope. That changes where one of the establishments is in a VAT group, as shown in Skandia (C-7/13) and Danske Bank (C-812/19). Multinationals should check whether any grouping applies before relying on FCE Bank.
C-284/04 (T-Mobile Austria and Others) – Auctioning of UMTS licences is not a taxable transaction
- The Austrian telecommunications regulatory authority allocated rights to use radio frequencies, including GSM, TETRA and UMTS frequencies, to mobile operators through auctions, receiving very large payments. The operators asked the Republic of Austria to issue VAT invoices so that they could deduct the VAT included in the price. Austria took the view that allocating frequency-use rights was not a taxable transaction. The dispute reached the Court through the Austrian courts and was decided by the Grand Chamber.
- In its judgment of 26 June 2007, the Court held that allocating rights to use the radio-frequency spectrum by auction, carried out by the national regulatory authority, is not an economic activity within Article 9(1). By doing so, the authority is performing its statutory task of monitoring and regulating the use of the spectrum. It is not exploiting property to obtain income on a continuing basis, even though the auction proceeds are high.
- The case confirms that a regulatory function that only public authorities can perform is outside the scope of VAT from the start, before any Article 13 analysis. Very large payments do not turn a regulatory act into an economic activity. For regulated sectors, such as telecommunications, energy and mining, fees for licences and concessions should be analysed carefully, as they may carry no deductible VAT and so be a real cost for operators.
- Mr van der Steen was the sole shareholder, sole director and only employee of a Dutch private limited company providing cleaning services. He did the cleaning work himself and received a fixed monthly salary, on which wage tax was withheld. The tax authority treated him as a taxable person alongside the company, which would have made him liable for VAT on the services. The case therefore concerned the boundary between employment and independent activity.
- In its judgment of 18 October 2007, the Court held that such a person is not a taxable person. When carrying out work on behalf of the company, he is bound to it by a relationship of subordination similar to employment. He receives a salary, does not bear the economic risk, and acts on behalf of the company. Under Article 10 of the VAT Directive, he is therefore excluded from being a taxable person. Only the company is the taxable person.
- Van der Steen is the leading case on how Article 10 applies to director-shareholders and one-person companies. The key features are fixed remuneration, subordination in terms of working conditions and the employer’s liability, and having no economic risk. It sets the basis for the later board-member cases, IO (C-420/18) and C-288/22. Owner-managers should make sure their contractual and remuneration arrangements reflect the intended VAT position. The same reasoning can apply to other owner-managers who work for their own company.
- The Carinthian regional organisation of the Austrian Social Democratic Party carried out external promotional activities, such as advertising, events and publications. It claimed to be a taxable person, so that it could deduct input VAT on the costs of these activities. The Austrian tax authority refused, and the referring court asked whether a political party’s external promotion was an economic activity. The case therefore turned on whether such activities are economic at all.
- In its judgment of 6 October 2009, the Court held that the external promotional activities of a political party, carried out to fulfil its political role, are not an economic activity within the meaning of Article 9(1). Such activities are a means of taking part in the exercise of political power, not of obtaining income on a continuing basis. As a result, the party is not a taxable person for these activities and has no right to deduct.
- The case sets a clear boundary for non-commercial organisations. Activities carried out to pursue political, ideological or similar aims, and not to compete on a market, are outside the scope of VAT, even if some income is received. The same reasoning can be relevant for associations, foundations and other non-profit bodies. Such bodies should separate their non-economic activities from any real commercial operations, and apportion input VAT accordingly.
- SKF, a Swedish parent company that supplied management services to its subsidiaries, sold all its shares in one subsidiary and its remaining shares in an associated company, to restructure the group and raise capital. It incurred advisory costs, such as valuation and legal services, in connection with the sales. SKF asked for an advance ruling on whether it could deduct the VAT on those costs. The question was whether the costs were linked to exempt transactions or to SKF’s overall economic activity.
- In its judgment of 29 October 2009, the Court held that a holding company’s disposal of shares in a subsidiary it is involved in managing is an economic activity, but is exempt under Article 135(1)(f). Input VAT on the disposal costs is deductible if the costs form part of the company’s general costs, and so of the price of its products, and have a direct and immediate link with its overall economic activity. They must not be incorporated in the share price.
- SKF is one of the key references on deducting costs of share transactions, alongside Marle (C-320/17) and C&D Foods (C-502/17). The distinction between costs linked to the exempt disposal and general overheads decides whether VAT is recoverable. Where the costs are built into the share price, deduction is not available. Groups should examine the purpose of each advisory mandate carefully and document it. Allocation keys for mixed costs should also be reviewed.
- In the Polish joined cases, Mr Słaby had acquired agricultural land for farming. When the land was rezoned for housing, he divided it into many plots and sold them. In the second case, private individuals sold plots from land held as private assets. The tax authority considered the sellers to be taxable persons because of the number and frequency of the sales. The Polish court asked when selling private land becomes an economic activity.
- In its judgment of 15 September 2011, the Court held that selling land that was part of private assets is not an economic activity merely because of the number or scale of the sales. It is the exercise of ownership rights. Such sales become an economic activity if the seller takes active steps to market the land, using resources similar to those of producers, traders or service providers, for example by installing utilities or carrying out marketing.
- Słaby and Kuć is the leading case on private land sales, and has been confirmed in LN (C-655/19) and Grzera (C-213/24). The test is qualitative, not quantitative. Rezoning by the authorities, which the owner does not initiate, is not an active step. Individuals selling land should keep records of what they did themselves, and what agents did for them, because development and marketing steps can make the sales taxable.
- Two individuals in Poland bought land with a travertine quarry, intending to use it in a partnership they were about to set up. The notarial deed and the invoice were issued in their own names, before the partnership was formed and registered. After registration, the partnership, Polski Trawertyn, claimed deduction of the input VAT. The Polish tax authority refused because the invoice was not in the partnership’s name and the costs preceded its existence.
- In its judgment of 1 March 2012, the Court held that Articles 9, 168 and 169 preclude national legislation that allows neither the partners nor the partnership to deduct input VAT on investment costs incurred before the partnership was formed and registered, for the purpose of its planned economic activity. The partnership could deduct even though the invoice was issued to the partners, provided the substantive conditions for deduction were met. Formal requirements cannot defeat neutrality.
- The case confirms that preparatory acts, even those carried out by future partners before an entity exists, are part of the economic activity, in line with Rompelman (C-268/83). This is important for start-ups, joint ventures and newly formed entities. Businesses should still make sure that pre-incorporation costs are documented, contractually transferred to the new entity and clearly linked to its planned taxable activity, so as to support deduction.
C-263/11 (Rēdlihs) – Owner of private forest can be taxable person for VAT purposes
- Mr Rēdlihs, a Latvian natural person, owned a private forest. After a storm damaged trees, he sold timber from the forest to repair the damage. He did not register for VAT. The Latvian tax authority considered that the timber sales were an economic activity. It held him to be a taxable person who should have registered, and imposed VAT and a penalty for failing to register.
- In its judgment of 19 July 2012, the Court held that selling timber from a private forest to remedy storm damage can be the exploitation of tangible property for the purpose of obtaining income on a continuing basis, and so an economic activity. The national court must assess all the circumstances, such as the duration of the activity, the number of customers and the amount of income, and compare it with how the activity is usually carried out.
- Rēdlihs confirms that the motive for an activity does not matter, because Article 9(1) applies ‘whatever the purpose’. Private owners who exploit natural resources, such as forests, quarries or land, can become taxable persons. The Court also held that penalties for failing to register must be proportionate. Individuals and family companies selling timber, crops or similar assets should monitor turnover and frequency to determine whether they need to register.
- Mr Tóth, a Hungarian sole trader, deducted input VAT on invoices issued by a subcontractor, a sole trader whose business licence had been withdrawn before the invoices were issued. The subcontractor had also failed to declare the workers he employed. The Hungarian tax authority refused deduction, arguing that the issuer was no longer a taxable person and that the transactions had not really been carried out by him.
- In its judgment of 6 September 2012, the Court held that the withdrawal of an individual’s business licence does not, in itself, prevent the customer from deducting VAT on invoices issued by that person. The issuer’s status as a taxable person depends on whether he actually carries out an economic activity, not on formal registration or a licence. Deduction may be refused only if it is established, on objective evidence, that the customer knew or should have known of fraud.
- Tóth confirms that taxable-person status under Article 9 is substantive. Formal defects on the supplier’s side, such as licence withdrawal, failure to register or undeclared staff, do not automatically affect the customer’s right to deduct. Tax authorities must prove fraud and the customer’s knowledge. Businesses should still carry out proportionate supplier checks, such as verifying VAT numbers and trade registrations, to show good faith if deduction is challenged.
C-285/11 (Bonik) – Suspicion of fraud no reason to refuse VAT deduction
- Bonik, a Bulgarian company, bought agricultural products and deducted input VAT on the invoices. After inspecting the suppliers and upstream operators, the tax authority concluded that the suppliers could not have made the deliveries, because they lacked the goods, staff or means of transport. It refused deduction, even though the goods had been received and resold by Bonik, and there was no evidence that Bonik was involved in fraud.
- In its judgment of 6 December 2012, the Court held that deduction cannot be refused just because the authority considers that the supplies were not made by the invoiced suppliers or their suppliers. Deduction may be refused only if the authority establishes, on objective evidence, that the supplies were actually made and that the taxable person knew or should have known that they were connected with VAT fraud committed by the supplier or another operator in the chain.
- Bonik is mainly a fraud and deduction case. Article 9 is relevant only because the upstream suppliers’ status and capacity were questioned. It confirms that the burden of proof lies with the tax authority, and that irregularities elsewhere in the chain do not automatically affect an honest trader. Businesses should keep evidence that goods and services were actually received, together with reasonable supplier due diligence. Tax authorities, in turn, cannot shift their own control duties onto the taxable person.
- Mr Kostov, a Bulgarian private enforcement officer, was registered for VAT for his enforcement activity. On an occasional basis, he supplied a separate service to a company under a one-off contract, unrelated to his profession. The Bulgarian tax authority considered that he supplied this service as a taxable person and assessed VAT on the fee. Mr Kostov argued that an occasional transaction outside his main activity was not subject to VAT.
- In its judgment of 13 June 2013, the Court held that a natural person who is already a taxable person for one activity must also be regarded as a taxable person for any other economic activity carried out occasionally. This applies provided that the other activity is an activity within the second subparagraph of Article 9(1). There is no need to show that the occasional activity is connected to the person’s main activity.
- Kostov means that once someone is a taxable person, occasional side transactions of an economic nature are generally within the scope of VAT, subject to exemptions. This contrasts with non-taxable individuals, for whom a one-off transaction is usually outside the scope under the Słaby and Kuć approach. Self-employed professionals and sole traders should therefore assess the VAT treatment of ad-hoc engagements, consultancy work or sales outside their core business.
C-219/12 (Fuchs) – Operating a rooftop photovoltaic installation is an economic activity
- Mr Fuchs, an Austrian homeowner, installed a photovoltaic system on the roof of his house, which was used for residential purposes. The installation had no storage facility. All the electricity it produced was fed into the grid, and he bought electricity back from the grid operator for his household. The amount he produced was lower than what he consumed. He claimed deduction of the input VAT on the installation, which the tax authority refused.
- In its judgment of 20 June 2013, the Court held that operating a photovoltaic installation on or near a private house, where the electricity is continuously supplied to the grid in return for remuneration, is an economic activity. This applies even though the amount produced is lower than the household’s consumption, and even though the owner buys electricity from the grid for private use. The installation is used for the purpose of obtaining income on a continuing basis.
- Fuchs is important for the energy transition, because private producers of solar energy can be taxable persons with a right to deduct. The key factor is that electricity is supplied continuously and for consideration, not how much is produced or the owner’s private situation. In practice, national small-business schemes and specific rules for photovoltaic systems, such as zero rates, may affect the outcome. Owners should check local rules before registering or claiming deduction.
C-72/13 (Gmina Wrocław) – Transfer by a municipality of elements of its heritage
- The Polish municipality of Wrocław had acquired property, including immovable property, by operation of law, inheritance or gift. It planned to sell some of these assets and to contribute others in kind to commercial companies in return for shares. The municipality asked for a tax ruling on whether these transactions were subject to VAT. The Minister of Finance considered that they were, and the case was referred to the Court.
- In its order of 20 March 2014, the Court held that the VAT Directive does not preclude such transactions from being subject to VAT, provided that the national court finds they are an economic activity within Article 9(1) and are not carried out by the municipality as a public authority under Article 13. Even if the municipality acted as a public authority, the transactions could still be taxed if treating them as non-taxable would lead to significant distortions of competition.
- The order applies the general Article 9 tests to how public bodies manage their assets. A municipality selling assets can act like a trader, especially where it markets property actively. The way the assets were acquired, whether free of charge or by inheritance, is not decisive. The national court must assess the actual conduct. Public bodies selling or contributing real estate should consider whether they are acting commercially, and whether an exemption for immovable property applies.
- Skandia America Corporation, established in the United States, bought IT services from external suppliers and passed them on to its Swedish branch, charging costs plus a mark-up. The Swedish branch was a member of a Swedish VAT group. The Swedish tax authority treated the supply from the US head office to the VAT group as taxable, with the VAT group liable for the VAT under the reverse charge.
- In its judgment of 17 September 2014, the Court held that supplies of services from a head office in a third country to its branch in a Member State are taxable transactions where the branch belongs to a VAT group in that Member State. By joining the VAT group, the branch becomes part of a new single taxable person, separate from the head office. The VAT group, as recipient of the services, is liable for the VAT.
- Skandia changed how cross-border internal flows are analysed wherever VAT groups include branches of foreign companies. The ‘single entity’ rule from FCE Bank no longer applies once a branch is part of a VAT group. Businesses with branches in Member States using the ‘establishment-only’ grouping model should map internal recharges, which may trigger reverse-charge VAT that is irrecoverable for exempt businesses. Several Member States have since adapted their grouping practices.
- Mr Macikowski, a Polish court enforcement officer, carried out a compulsory sale by auction of immovable property owned by a taxable person. Polish law required the enforcement officer to calculate and pay the VAT on the sale, without being able to deduct input VAT. It also imposed a short payment deadline, even though the purchase price was paid to the court. He was held liable for not paying the VAT in time.
- In its judgment of 26 March 2015, the Court held that Articles 9, 193 and 199(1)(g) do not preclude national law that, in a sale of immovable property through enforcement, requires the enforcement officer to calculate and pay the VAT on the transaction. The supplier remains the taxable owner, and the officer acts as a collector. However, such rules must respect proportionality. In particular, the officer must be given enough time to receive the funds.
- The case shows that Article 9 identifies the taxable person, while Member States have some freedom to organise VAT collection through third parties. In forced sales, the owner of the property is still the person making the supply, even though an official manages the sale. Creditors, insolvency practitioners and enforcement officers should check local rules on who invoices and pays VAT, and when, in forced sales of business assets.
- Lisboagás, the concessionaire of the gas distribution network in the Lisbon area, paid fees to municipalities for occupying public land and subsoil with its network. It passed those fees on to gas suppliers, which in turn passed them on to consumers. The question was whether those municipal fees formed part of the taxable amount of Lisboagás’s gas distribution services, or could be excluded from it. The fees were levied by the municipalities under national law.
- In its judgment of 11 June 2015, the Court held that the fees paid by a gas network concessionaire to municipalities for the use of public land must be included in the taxable amount of the distribution service under Articles 73 and 78. The fees are directly linked to the supply, and the concessionaire itself is the person liable to pay them. They are therefore not amounts received on behalf of the municipalities.
- Article 9 is not central here: the case concerns the taxable amount under Articles 73 and 78. It is mainly relevant for utilities, concessionaires and network operators that recharge public levies. Levies for which the supplier itself is liable, and which are passed on, form part of the price and are subject to VAT. This must be distinguished from disbursements made in the customer’s name, which are excluded under Article 79(c).
- Mr Kezić, a Slovenian sole trader operating as Trgovina Prizma, bought seven plots of land in a private capacity without paying VAT. He obtained permits and built a shopping centre on them as a sole trader. He later allocated five plots to his business assets, but kept two plots, the land at issue, in his private assets. In 2004, he sold the shopping centre and all seven plots together to two companies.
- In its judgment of 9 July 2015, the Court held that the sale of land classified as private assets can be subject to VAT where the taxable person acted as such in carrying out the sale. That can be the case where the land was used in the economic activity, for example as the site of a business building. Classifying assets as private does not prevent a supply of those assets from falling within the scope of VAT.
- Trgovina Prizma limits the effect of formally allocating assets to private use: what counts is how the assets are actually used and whether the sale is part of the economic activity. For sole traders and partnerships holding mixed-use property, it confirms that a private label will not shield a sale linked to the business. Businesses should document the allocation and use of real estate carefully, including the input VAT treatment when it was acquired.
C-276/14 (Gmina Wrocław) – Municipal budgetary entities cannot be regarded as taxable persons
- The Polish municipality of Wrocław carried out its tasks partly through budgetary entities, such as schools and cultural institutions. These entities had no legal personality or assets of their own. Their revenue went to the municipal budget and their expenses were paid from it. Polish practice treated these entities as separate taxable persons. The municipality argued that it and its budgetary entities should be treated as a single taxable person.
- In its judgment of 29 September 2015, the Court held that such municipal budgetary entities cannot be regarded as taxable persons separate from the municipality, because they do not meet the independence criterion in Article 9(1). They do not act in their own name or bear the economic risk of their activities, which falls on the municipality. The municipality itself is therefore the taxable person for their economic activities.
- The ruling led to the centralisation of VAT settlements for Polish local authorities, and applies to similar structures elsewhere. It confirms that independence depends on economic risk and the ability to act in one’s own name, not on administrative organisation. For public-sector groups, this affects where VAT is registered, how returns are filed and how deduction is calculated. It also means transactions between the municipality and its units are internal and outside the scope of VAT.
- Sveda, a Lithuanian company, built a recreational path with EU and national funding, which the public could use free of charge. The company intended to use the path to attract visitors to its commercial activities nearby, including the sale of goods and services. It claimed deduction of the input VAT on the construction costs. The Lithuanian tax authority refused because the path itself was provided free of charge.
- In its judgment of 22 October 2015, the Court held that a taxable person can deduct input VAT on the acquisition or construction of a capital good intended for planned economic activities, even if the good is first made available to the public free of charge. The condition is that there is a direct and immediate link between the costs and the taxable person’s planned taxable transactions. The free access served as a means of attracting visitors to those transactions.
- Sveda shows that Article 9(1) and the deduction rules look at the overall economic purpose of an investment. Free facilities used to attract customers, such as parking areas, public spaces or leisure infrastructure, can support deduction if they serve the taxable business. The link must be supported by objective evidence. Businesses investing in such assets should document the commercial rationale and the planned taxable use from the start.
C-174/14 (Saudaçor) – Company of the Azores Autonomous Region carries out economic activity
- Saudaçor, a public limited company owned by the Autonomous Region of the Azores, carried out planning and management tasks for the regional health service under a programme contract with the Region, which paid it for this work. The company also had certain powers under public law. The Portuguese tax authority treated these activities as taxable services. Saudaçor argued that it was acting as a public authority and should fall outside the scope of VAT.
- In its judgment of 29 October 2015, the Court held that such activities can be economic activities carried out for consideration. The Article 13 exclusion applies only where two conditions are both met: the activities are carried out by a body governed by public law, and they are carried out as a public authority. It was for the national court to decide whether Saudaçor met both conditions, taking into account its private-law form, its public powers and how it was financed.
- Saudaçor clarifies the order of analysis for public-sector entities: first establish whether there is an economic activity under Article 9, then apply the conditions of Article 13. Having a private-law form or contractual remuneration makes it harder to rely on the public-authority exclusion. Public entities set up to manage services for regional or central governments should assess both conditions. Even if Article 13 applies, significant distortions of competition would still make the activities taxable.
- The Dutch municipality of Borsele organised school transport for pupils, using transport undertakings. Some parents paid an income-related contribution, which covered only around 3% of the total cost. The rest was paid from the municipal budget. The municipality claimed that it was a taxable person carrying out an economic activity, so that it could deduct input VAT on the transport services it bought in. The tax authority considered that the municipality was not acting as a taxable person.
- In its judgment of 12 May 2016, the Court held that such an activity is not an economic activity under Article 9(1). A direct link between the service and the payments is not enough on its own. The payments covered only a small part of the costs, were set according to parents’ income rather than the service, and not all users paid. That showed there was no real link to consideration, and the activity was not carried out like a market activity.
- Borsele is the leading case on the ‘asymmetry’ between payments and costs in public services. It sets out a framework that looks at the ratio of fees to costs, how fees are set, and whether the activity resembles a commercial offer. It was later applied in the Polish municipal cases. For public bodies, it means token or income-related contributions generally do not create an economic activity, which also limits input VAT recovery.
C-263/15 (Lajvér) – Operation of agricultural engineering works is an economic activity
- Two Hungarian non-profit companies, Lajvér and Lajvér Csapadékvízrendszer, built agricultural drainage and water-management works, mostly financed by state aid. They intended to operate the works and charge users fees for using them, although the expected revenue was small compared with the investment. The tax authority refused input VAT deduction on the construction costs, arguing that there was no real economic activity. The case concerned whether such an operator carries out an economic activity at all.
- In its judgment of 2 June 2016, the Court held that operating such works in return for fees can be an economic activity, where it is carried out to obtain income on a continuing basis. The fact that the activity is largely publicly funded, that or that the fees are low, does not in itself prevent this. The referring court had to assess all the circumstances, including whether the fees were real consideration.
- Lajvér shows that public funding and modest income do not rule out an economic activity. It contrasts with Borsele (C-520/14) and Gmina O. (C-612/21), where users paid only token amounts with no real link to the service. For publicly funded infrastructure projects, the key questions are whether users pay genuine consideration and whether the operator acts like a market operator. Input VAT recovery depends on the answers.
- Maya Marinova ET, a Bulgarian sole trader, ran retail outlets. An audit found that goods it had bought and deducted VAT on were neither in its warehouse nor recorded in its accounts, and some purchase invoices had not been booked. The Bulgarian tax authority presumed that the goods had been sold to third parties without VAT being charged. It then assessed VAT on those presumed sales, based on the information available.
- In its judgment of 5 October 2016, the Court held that Articles 2(1)(a), 9(1), 14(1), 73 and 273, and the principle of fiscal neutrality, do not preclude such legislation. Where goods supplied to a taxable person are missing from its warehouse and the related documents are not recorded, the tax authority may presume a later sale and set the taxable amount from the facts available. The national court must check that the rules do not go beyond what is necessary.
- The case is mainly about taxable amount and evidence, with Article 9 as background: the trader’s status as a taxable person underpins the presumption that the goods were sold in the course of business. It shows that poor record-keeping can lead to presumed taxable supplies and estimated assessments. Businesses should ensure stock records, invoice booking and reconciliation of inventory differences are accurate, particularly in retail and distribution.
- Members of the Nigl family ran three civil-law partnerships in Austria producing wine. The partnerships shared some resources and sold their wine under a common brand, partly through a limited liability company. The Austrian tax authority treated the partnerships as a single undertaking, and so as one taxable person whose combined turnover excluded it from the flat-rate scheme for farmers. It applied this treatment retroactively. The partnerships challenged both the merger of their activities and its retroactive effect.
- In its judgment of 12 October 2016, the Court held that partnerships such as these must be regarded as separate taxable persons if each carries out an economic activity independently. That means each acts in its own name, on its own account and under its own responsibility, and bears its own economic risk. Close family, economic and organisational links do not merge them into one taxable person. That result can only be achieved through a VAT group under Article 11.
- Nigl protects the legal and economic separateness of closely linked businesses. Tax authorities cannot combine them informally to raise turnover or remove access to special schemes. Where they suspect artificial fragmentation, the abuse-of-rights doctrine or VAT grouping rules are the proper tools. The case is relevant to family businesses and group entities that share brands, staff or distribution channels. Each entity should be able to show that it contracts, invoices and bears risk in its own right.
C-28/16 (MVM) – Also VAT deduction limitation for ”active” company that holds participations
- MVM, a Hungarian state-owned energy holding company, bought in services, such as consultancy and strategic support, which it made available to its subsidiaries free of charge. MVM also supplied some taxable services to the subsidiaries for consideration. The tax authority refused deduction of the input VAT on the services passed on free of charge, arguing that they were not used for taxable transactions. The case raised the question of how far an ‘active’ holding can recover VAT on costs.
- In its judgment of 12 January 2017, the Court held that a holding company that is involved in the management of its subsidiaries is not automatically entitled to deduct all input VAT. Input VAT on services acquired and then supplied to subsidiaries free of charge is not deductible if those services are not linked to the holding’s taxable transactions. The national court had to check whether such a link existed, or whether the costs were general overheads.
- MVM shows that ‘active holding’ status is necessary but not sufficient for full deduction. Each cost must still be linked to taxable outputs or treated as a general overhead of the economic activity. Groups should avoid providing services free of charge to subsidiaries where they want to recover input VAT. Charging an arm’s length fee and invoicing properly usually makes the direct link clear and supports deduction.
- Nagyszénás was a non-profit company wholly owned by a Hungarian municipality. Under a contract with the municipality, it carried out various public tasks that the municipality was required to perform. The municipality paid it for this work. The company treated the payments as consideration for taxable supplies and deducted input VAT. The tax authority argued that the payments were subsidies, and that the company was acting as a public body.
- In its judgment of 22 February 2018, the Court held that such an activity, carried out for remuneration under a contract with the municipality, is an economic activity within Article 9(1). The Article 13 exclusion did not apply. Where public tasks are carried out by a separate entity under a contract with a public authority, and not under a special public-law regime, the entity does not act as a public authority, even if the tasks are public in nature.
- The judgment matters for municipalities that outsource public services to wholly owned companies. Those companies are generally taxable persons with a right to deduct, provided there is a real supply for consideration. The contract terms, the payment mechanism and whether the entity has its own public powers are decisive. Public owners should check that remuneration is contractual and linked to the services, rather than a general grant, to secure taxable status.
- Marle Participations, a French holding company, was restructured and incurred costs linked to acquiring shares in subsidiaries. It deducted the input VAT on those costs. The French tax authority refused part of the deduction, arguing that letting a building to a subsidiary was not enough for the holding to be regarded as involved in the management of its subsidiaries in the VAT sense. The case concerned the conditions under which such a holding is regarded as ‘active’.
- In its judgment of 5 July 2018, the Court held that letting a building by a holding company to its subsidiary is involvement in the management of the subsidiary, and therefore an economic activity. It gives a right to deduct VAT on costs incurred to acquire shares in that subsidiary. Where the holding is involved in managing only some subsidiaries, input VAT on general costs is deductible only in proportion to the costs linked to its economic activity.
- Marle lowers the threshold for ‘active’ holding status: any taxable supply, even a single lease, can be enough, provided it is a real transaction subject to VAT. Holdings should document the services they supply to subsidiaries, such as management, IT, financing or leases, and the related consideration. They should also allocate costs between active and passive holdings. Where the Member State’s rules allow, a pro rata key may be needed for mixed holdings.
C-502/17 (C&D Foods Acquisition) – Deduction input VAT for Holdings; Sales of shares
- C&D Foods Acquisition, a Danish holding company, owned shares in a subsidiary to which it supplied taxable management services. It planned to sell the subsidiary’s shares, mainly to use the proceeds to repay its parent company’s debt, and incurred significant advisory costs. The sale did not take place. The company claimed deduction of the input VAT on the advisory costs, which the Danish tax authority refused.
- In its judgment of 8 November 2018, the Court held that an intended sale of shares in a subsidiary, where the aim is to use the proceeds to repay a parent company’s debt, is not an economic activity within the scope of VAT. That applies even if the holding supplied taxable management services to the subsidiary. It is different only if the transaction is directly linked to the holding’s taxable activity, or is a direct, permanent and necessary extension of it.
- The case narrows the room for deducting VAT on share-disposal costs. The key question is whether the costs have a direct and immediate link with taxable outputs, or with the overall economic activity as general overheads. Where the sale serves shareholder or group financing purposes, deduction is generally denied. Holding companies should record the business rationale for a transaction and how its costs are used, and make sure recharges to subsidiaries are real taxable supplies.
C-420/18 (IO) – Member of Supervisory Board is not a VAT taxable person
- IO, a Dutch individual, was a member of the supervisory board of a foundation. IO received a fixed annual remuneration that did not depend on attendance at meetings or hours worked. The Dutch tax authorities considered IO a taxable person and assessed VAT on that remuneration. The referring court asked whether a supervisory board member carries out an economic activity independently within the meaning of Article 9(1).
- In its judgment of 13 June 2019, the Court held that such a supervisory board member does not carry out an economic activity independently and is not a taxable person. He does not act in his own name, on his own account or under his own responsibility, because the supervisory board acts collectively and he cannot exercise its powers alone. His fixed remuneration also means he bears no economic risk from his activity.
- IO shaped the modern independence test, which focuses on acting in one’s own name, for one’s own account and under one’s own responsibility, and on bearing economic risk. It was followed in C-288/22 for Luxembourg board members. Organisations paying fees to supervisory or non-executive board members should check whether VAT is charged. Where remuneration is fixed and the member acts only through the collegiate board, VAT should generally not be charged.
- Paulo Nascimento Consulting, a Portuguese company, held a claim against a third party that had been recognised by a court in enforcement proceedings. It assigned that claim for a price in a one-off transaction. The Portuguese tax authority considered the assignment a taxable transaction and assessed VAT on it. The referring court asked whether such an assignment was an economic activity, and, if so, whether it was exempt.
- In its judgment of 16 January 2020, the Court held that a one-off assignment of a judicially recognised debt, made to recover the value of an asset, is not an economic activity within Article 9(1) if it does not go beyond the simple management of the assignor’s assets. It would be an economic activity only if it were a direct, permanent and necessary extension of the taxable activity. In that case, it would be exempt under Article 135(1)(d).
- The ruling confirms the line from Polysar, Wellcome Trust and EDM: the occasional sale of financial assets or claims is generally outside the scope of VAT. Businesses that sell receivables in one-off transactions, for example when restructuring or clearing debts, should assess whether the transaction forms part of their normal activity. Even if it does, it will usually be exempt, which can affect the pro rata calculation and input VAT recovery on related costs.
C-424/19 (Cabinet de avocat UR) – Lawyers are taxable persons
- A Romanian law firm was assessed for VAT on its legal services following a tax inspection. The firm argued, among other things, that the profession of lawyer was not an economic activity for VAT purposes. It also relied on earlier national case law and practice. In addition, it sought to deduct input VAT for the period concerned, although it did not hold all the required invoices.
- In its judgment of 16 July 2020, the Court held that lawyers who supply legal services independently for remuneration carry out an economic activity and are taxable persons under Article 9(1). The activities of the professions are expressly listed in that provision. The Court also addressed deduction. A taxable person who claims deduction must prove that the substantive conditions are met, and in principle this is done by producing the invoices required under the Directive.
- The judgment confirms that the liberal professions are firmly within the scope of VAT. Neither the regulated nature of a profession nor national practices can remove services supplied independently for payment from Article 9(1). For professionals who fail to register on time, the case shows two risks: output VAT is assessed retroactively, and input VAT recovery may be limited if proper invoices are not available. Timely registration and good documentation remain essential.
C-312/19 (Valstybinė mokesčių inspekcija) – Partnership is liable to pay VAT
- XT, a Lithuanian natural person, concluded a joint activity (partnership) agreement with another individual to build residential buildings and sell them. The partnership had no legal personality. XT dealt with builders and buyers in his own name. The tax authority considered XT the taxable person liable for VAT on all the sales, while XT argued that the VAT liability should be shared or attributed to the partnership.
- In its judgment of 16 September 2020, the Court held that a natural person who has concluded a joint activity agreement with another person, forming a partnership without legal personality, and who alone deals with third parties in his own name when carrying out the economic activity covered by the agreement, is the taxable person under Article 9(1). He is solely liable for the VAT on those transactions under Article 193.
- The ruling sets a clear test for contractual partnerships: VAT follows the person who acts towards third parties, not the internal sharing of profits. The case was later developed in DGRFP Cluj (C-519/21) and Česká síť (C-796/23). Joint ventures and consortia should document which party contracts, invoices and bears the risk. Internal cost- and profit-sharing between partners does not change the external VAT analysis, but it may raise separate supply questions.
- LN, a Romanian natural person, had lent money privately. To recover the debts, LN acquired several immovable properties in enforcement proceedings and later resold them. The tax authority considered that the acquisitions and resales formed an economic activity. It held LN to be a taxable person who should have registered for VAT, and assessed VAT on the sales. The referring court asked whether this was an economic activity or merely the management of private assets.
- In its judgment of 20 January 2021, the Court held that acquiring properties in enforcement proceedings to recover a debt, and then selling them, is not in itself an economic activity within Article 9(1). It is the mere exercise of ownership rights and management of private assets. Such transactions become an economic activity only where the person takes active steps to market the properties, using resources similar to those of producers, traders or service providers.
- LN applies the Słaby and Kuć test to property obtained through enforcement. The number of transactions alone does not make someone a taxable person. The decisive question is whether the person behaves like a trader. Individuals and non-business creditors who recover debts by taking over and reselling assets should keep evidence showing that they did not carry out trader-like marketing activities, such as development, subdivision or professional advertising, in order to stay outside the scope of VAT.
C-812/19 (Danske Bank) – Head office in a VAT group and its branch are separate taxable persons
- Danske Bank’s head office in Denmark was a member of a Danish VAT group. Its branch in Sweden, which was not in any VAT group, used an IT platform provided by the head office, and the related costs were allocated to the branch. The Swedish tax authority treated the allocation as consideration for services supplied by the Danish VAT group to the Swedish branch, and assessed VAT under the reverse charge.
- In its judgment of 11 March 2021, the Court held that a head office in one Member State that belongs to a VAT group there, and its branch in another Member State, must be regarded as separate taxable persons. Services supplied by the head office to the branch, with costs allocated to the branch, are therefore taxable transactions. The Swedish branch, as the recipient, is liable for the VAT.
- Danske Bank is the ‘reverse Skandia’ case: it confirms that VAT grouping breaks the unity of the legal entity in both directions. Multinationals, especially in financial services and insurance where input VAT is often not recoverable, must map which establishments are in VAT groups, and review cross-border cost allocations, IT recharges and shared-service charges between head offices and branches. Such allocations may create taxable supplies, reverse-charge obligations and irrecoverable VAT.
C-846/19 (EQ) – Mandates in connection with custody and guardianship cases are an economic activity
- EQ, a Luxembourg lawyer, carried out mandates as guardian or curator for adults lacking legal capacity. The mandates were entrusted by a court, and the remuneration depended on the ward’s financial means. The VAT authority assessed VAT on the fees. EQ argued that these mandates were not an economic activity, and that the authority’s earlier practice gave rise to legitimate expectations. The referring court asked whether such court-ordered mandates are supplied for consideration in the course of an economic activity.
- The Court held that guardianship and curatorship mandates carried out by a lawyer are a supply of services for consideration and an economic activity. This applies where the activity is carried out on a permanent basis for remuneration that is, in principle, intended to cover its costs, even if the remuneration is not always paid and is set by reference to the ward’s means. The Court also addressed the social-welfare exemption and legitimate expectations, leaving key assessments to the national court.
- The case confirms that court-appointed or socially oriented mandates can still be economic activities when carried out by professionals in a continuing way for payment. The specific purpose, and the fact that fees are regulated or partly publicly funded, do not decide the question. Professionals carrying out such mandates should look at whether the Article 132(1)(g) social-welfare exemption may apply, which depends on recognition as a body devoted to social wellbeing.
- In Poland, a married couple each ran an agricultural activity using assets held under statutory marital joint ownership. The tax authority considered that, because the farm assets were jointly owned, the spouses formed a single agricultural holding and should be treated as one taxable person. The referring court asked how Articles 9(1) and 193 apply. The answer mattered because combining the activities would affect which VAT rules applied and who was liable to pay the tax.
- The Court held that a spouse who carries out an agricultural activity independently, in his or her own name, on his or her own account and at his or her own risk, is a separate taxable person. This applies even though the assets used are held under marital joint ownership with the other spouse, who carries out a separate activity. Joint ownership of assets does not by itself merge two independent activities into one taxable person.
- The ruling confirms that Article 9 looks at who actually carries out the economic activity and bears the risk, not at who owns the assets. It is relevant for family farms and small businesses where spouses or relatives share property but run separate activities. The same logic appears in Grzera (C-213/24), where joint ownership was the taxable person because the spouses acted jointly. The facts of each case, especially how the parties act towards third parties, decide.
C-146/21 (DGRFP Bucureşti) – No application of Reverse-Charge before VAT registration
- VB, a Romanian individual, owned forest land and sold standing timber to forestry companies between 2011 and 2017. An audit found that her turnover had exceeded the small-business exemption threshold in 2011, so she should have registered for VAT. The authority assessed VAT retroactively and refused to apply the domestic reverse charge for wood products, because Romanian law required both parties to be registered for VAT for the mechanism to apply.
- In its judgment of 30 June 2022, the Court held that the Council implementing decisions authorising Romania to apply a reverse charge on wood products, read with the principle of fiscal neutrality, do not preclude national legislation that makes the mechanism conditional on the supplier being registered for VAT. A supplier who failed to register when required can therefore be held liable for VAT on supplies made before registration, under the normal rules.
- The case shows how Article 9 status and formal obligations interact. VB was a taxable person because of her continuing exploitation of the forest, whether registered or not. However, failing to register can have real consequences, such as losing access to simplification measures. Businesses with occasional or growing activities, including exploitation of land, forests or other assets, should monitor thresholds closely and register on time to avoid retroactive assessments on a VAT-inclusive basis.
C-512/21 (Aquila Part Prod Com) – Denial of input VAT due to fraud, without carrying out checks
- Aquila, a Romanian company, traded food products in Hungary. It bought edible oil from a Hungarian supplier and resold it, acting through a contractor whose representative handled the transactions. After a five-year audit, the Hungarian tax authority refused input VAT deduction, claiming that the company had taken part in carousel fraud. It relied on irregularities in the chain, breaches of food-chain safety rules, and what the contractor’s representative should have known.
- In its judgment of 1 December 2022, the Court recalled that deduction may be refused only where the tax authority establishes, on objective evidence and not by presumption, that the taxable person knew or should have known that it was taking part in VAT fraud. A taxable person cannot be required to carry out checks equivalent to those of the tax authority. Breaches of food-safety obligations and a representative’s knowledge may be taken into account.
- Article 9 is only context in this case: the core issues are the knowledge test and the burden of proof for refusing deduction. The case is useful for supply-chain due diligence, especially where third parties act on the taxable person’s behalf. Businesses should document supplier checks proportionate to the risk indicators present, and make sure that agents and service providers follow the same standards, as their knowledge may be attributed to the principal.
C-519/21 (DGRFP Cluj) – Right to deduct VAT even if status of taxable person cannot be established
- Four natural persons in Romania signed an association contract to build a residential complex, without creating a legal person. Apartments were then sold to third parties by some of the members. The tax authority found that one member, ASA, was the taxable person liable for VAT on the sales, including transactions linked to another member. It reassessed VAT and penalties, but refused deduction because the input invoices were issued to another member of the association.
- In its judgment of 16 February 2023, the Court held that the parties to an association contract without legal personality, which was not registered before the activity began, cannot be regarded as taxable persons alongside the person actually liable for the VAT. A taxable person without an invoice in its own name must be allowed to deduct input VAT paid by another party for the association’s activity, unless objective evidence shows the inputs were used for that party’s own taxed transactions.
- The ruling applies the Article 9 analysis to informal cooperation structures, which are common in real estate. Tax authorities cannot impose VAT on one partner for the whole activity while denying input deduction on formal grounds. Fiscal neutrality requires that the person held liable for output VAT can also recover the related input VAT. For joint projects, it is still advisable to define clearly in advance who invoices, who registers and who is the taxable person.
C-612/21 (Gmina O.) – Municipality organising renewable energy installations is not a taxable person
- A Polish municipality joined a project with other local authorities to install renewable energy systems, such as solar installations, on residents’ properties. Residents who wanted an installation paid a contribution of 25% of the eligible costs, up to an agreed maximum. A provincial subsidy covered 75%. The municipality contracted installers. The tax authority considered that the municipality supplied services for consideration and was a taxable person. The municipality challenged this in a tax-ruling dispute.
- In its judgment of 30 March 2023, the Court held that such an activity is not an economic activity under Article 9(1), and so is not a supply for consideration subject to VAT. The activity was not aimed at obtaining income on a continuing basis. Residents covered only part of the costs, and the project was mainly publicly financed. Because there was no economic activity, the Court did not need to examine the Article 13 exclusion for public authorities.
- Gmina O. applies the Borsele approach to modern green-energy programmes: where public funds bear most of the cost and the aim is not to generate income, a public body is not acting as a market operator. The ruling is important for local authorities that run subsidised energy, climate or environmental projects. It removes output VAT on residents’ contributions and subsidies, but also means input VAT on such projects is generally not deductible.
C-616/21 (Gmina L.) – Municipality contracting out asbestos removal is not a taxable person
- A Polish municipality arranged, through a specialised undertaking, for asbestos products and waste to be removed and collected from the properties of residents who had registered their interest. Residents paid nothing. The programme was financed from public funds, with a provincial subsidy covering between 40% and 100% of the costs. The tax authority considered that the municipality was a taxable person supplying services, and that the subsidy formed part of the taxable amount.
- In its judgment of 30 March 2023, the Court held that where a municipality arranges asbestos removal for its residents, the activity is not intended to obtain income on a continuing basis, and residents make no payment because the work is publicly financed, it is not a supply of services subject to VAT. Without any consideration from the beneficiaries, there is no supply for consideration and no economic activity under Article 9(1).
- Together with Gmina O., this case gives clear guidance on public programmes financed wholly or largely from public funds. A subsidy paid to a public body to implement a public-interest programme is not, in itself, consideration for a supply to residents. Contractors carrying out the work remain taxable persons, and their supplies to the municipality are taxable. The municipality, however, generally cannot recover the VAT charged, because it has no taxable output.
- TP, a natural person, sat on the boards of directors of several Luxembourg public limited companies (sociétés anonymes) and received directors’ fees. The Luxembourg VAT authority had long treated such directors as taxable persons required to charge VAT on their fees. TP challenged this, and the national court asked whether a board member carries out an economic activity independently within the meaning of Article 9(1). The case therefore turned on the independence condition rather than on whether he was paid.
- In its judgment of 21 December 2023, the Court held that a member of the board of directors of a public limited company does not act independently. The board acts collectively. An individual member acts neither in his own name nor on his own account nor under his own responsibility, and cannot bind the company alone. He also bears no real economic risk of his own, since he is not liable for damage caused by the board’s actions. He is therefore not a taxable person.
- The judgment led the Luxembourg VAT authority to change its practice of charging VAT on fees paid to individual directors. It confirms the independence test used in IO (C-420/18) and van der Steen (C-355/06). Groups should review how board fees are invoiced across jurisdictions. Corporate directors, and individuals who genuinely bear economic risk or act outside the collegiate board, may still need a separate analysis. Individual directors should also review any VAT registrations held only for board mandates.
- Feudi di San Gregorio, an Italian company in wine production and marketing, was treated as a ‘non-operating company’ under Italian anti-avoidance rules. Under those rules, a company whose turnover over a reference period fell below a minimum amount calculated from the value of its assets was presumed to be a shell. As a result, the tax authority refused the company’s input VAT deduction, refund and offsetting, even though it carried out genuine transactions.
- In its judgment of 7 March 2024, the Court held that the status of taxable person cannot depend on the value of output transactions reaching a threshold. Article 9(1) sets no minimum turnover and applies whatever the results of the activity. National legislation cannot deny the right to deduct input VAT because a taxable person’s output transactions are considered insufficient. Such a rule goes beyond what is necessary to fight fraud and abuse, and breaches fiscal neutrality and proportionality.
- The judgment reinforces that taxable-person status is objective. Start-ups, loss-making entities and companies with long investment cycles keep their right to deduct, provided they carry out an economic activity. Member States can still act against genuine fraud and abuse, but only case by case and on the basis of objective evidence, not through general presumptions based on turnover. Groups with Italian entities, and entities in similar regimes, should review deductions previously refused on this basis.
C-182/23 (Makowit) – Expropriation of agricultural land from a farmer is a taxable supply
- J.S., a Polish farmer registered for VAT, ran a dairy farm and owned parcels of agricultural land acquired for his farming activity. By a decision of the public authority, ownership of some parcels was transferred to the State Treasury for road construction in exchange for compensation. The farmer did not trade in property and had taken no steps to sell the land. The question was whether the compensation received for the expropriated land was subject to VAT.
- In its judgment of 11 July 2024, the Court held that a transfer by expropriation of agricultural land against compensation is a supply of goods under Article 14(2)(a). It is subject to VAT where the owner is a farmer who is a taxable person acting as such. This applies even if the farmer carries out no property-marketing activity and took no steps to bring about the transfer. A taxable person acting in a private capacity, however, does not make a taxable supply.
- The decisive point is whether the land was allocated to the taxable person’s economic activity, not whether active marketing steps were taken. The Słaby and Kuć ‘active steps’ test applies to private assets, whereas Makowit concerns business assets of an existing taxable person. Farmers and other businesses facing expropriation should check how the land was allocated and used, whether an exemption for land could apply, and whether the compensation should be treated as including VAT.
- A Polish married couple owned agricultural land under statutory joint ownership and sold it for residential development. The preparation of the sale was entrusted to a professional trader acting as their agent. The agent took active steps, such as obtaining planning decisions and preparing the plots for sale. The tax authority treated the sale as an economic activity subject to VAT. The referring court asked whether the agent’s steps could be attributed to the owners, and who the taxable person was.
- In its judgment of 3 April 2025, the Court held that a person who transfers land that was initially part of his or her personal assets may be a taxable person carrying out an economic activity. This applies where a professional agent, acting on that person’s behalf, takes active marketing steps comparable to those of a trader. The statutory joint ownership of spouses can itself be the taxable person where both spouses act jointly and it bears the economic risk.
- Grzera extends the Słaby and Kuć test: what counts is whether trader-like steps are taken, not who physically carries them out. Individuals cannot avoid VAT by outsourcing the development and marketing of land to an agent while keeping the economic benefit and risk. The ruling also confirms that EU criteria, namely independence and economic risk, decide who the taxable person is, with national property law only providing context. Land sales involving spouses or co-owners need careful structuring and documentation.
- Česká síť, a Czech limited liability company, cooperated closely with branches of US companies operating in the Czech Republic. The Czech tax authorities treated the undertakings as partners in a civil-law partnership without legal personality. Under Czech law, one ‘designated partner’ accounts for VAT on the partnership’s activity. Česká síť was therefore ordered to pay VAT and a penalty on services that the other partners had supplied to their own customers.
- In its judgment of 11 December 2025, the Court held that Articles 9(1) and 193 preclude national legislation that deems a designated partner to be liable for VAT on taxable services provided by the other partners, where those partners dealt with end customers themselves. It is irrelevant that, in doing so, the partners departed from civil-law rules on representing the partnership. Whoever supplies in its own name, for its own account and at its own risk is the taxable person.
- The judgment confirms that VAT liability follows economic reality, not civil-law constructions or administrative convenience. Member States cannot shift liability to one partner simply because a partnership exists under national law. For joint ventures, consortia and cooperation structures, the key question is which entity contracts with customers, invoices, records the income and bears the risk. Concerns about activities being split to stay below thresholds must be addressed with other instruments, such as the abuse-of-rights doctrine.
- Digipolis was a Belgian public-law commissioning association set up by the cities of Antwerp and Ghent and their public social welfare centres. It supplied ICT and telematics services and computer equipment to its members, and also to third parties. Members paid on a flat-rate basis under distribution keys that only covered costs. Under an administrative tolerance based on the so-called emanation theory, Belgium treated these supplies to members as internal and outside the scope of VAT.
- In its judgment of 25 February 2026, the General Court, ruling on a preliminary reference, held that the association supplies services for consideration and carries out an economic activity, because the cooperation is long-term and the fees cover its costs. Digipolis acts independently: it has its own legal personality, statutes, assets, budget and staff, and bears its own economic risk. The VAT status of individual members is irrelevant, and a practice treating the supplies as self-supplies by members is precluded.
- The ruling was given by the General Court under its new preliminary-ruling jurisdiction for VAT, and it directly concerns Belgian intermunicipal cooperation structures. Public bodies and their service associations should reassess whether cost-sharing supplies are within the scope of VAT, and what that means for output VAT, input VAT recovery and past periods. Businesses dealing with such associations should check contracts, pricing and invoicing, as tolerances based on national practice cannot override Articles 2, 9 and 13.
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