VATupdate

ECJ C-677/21 Fluvius Antwerpen vs. BE (Questions): Is the unlawful use of energy is a supply of goods?

[Information concerning the proceedings before the referring court] Assessment of the claim
1 MX was summoned by the distribution network operator, Fluvius Antwerpen
(‘Fluvius’), to pay the sum of EUR 813.41 (inclusive of VAT), together with
default interest in the amount of EUR 4.80 as well as statutory interest from the
time of the summons in respect of the consumption of electricity … for the period
from 7 May 2017 to 7 August 2019.
That invoicing did not take place because MX was supplied with electricity by
Fluvius pursuant the latter’s public service obligation under Article 5.2.3(1) of the
Energiebesluit (Energy Decision). This provision stipulates that if a domestic
customer’s contract is terminated by his or her energy supplier, for example for
non-payment, and this customer does not enter into a new contract with another
energy supplier, he or she will be supplied by the distribution network operator.
This invoicing took place because MX used electricity at the address at which he
resides … without having concluded a contract for such use with a commercial
energy supplier and without having had a contract previously terminated by a
(different) commercial energy supplier at that address and, as a result, was
supplied by Fluvius on the basis of the public service obligation. In other words,
the invoicing took place after Fluvius had established, with the passage of time,
that actual usage, referred to as unlawful usage. Based on a comparison between
the meter reading at the start of the unlawful usage and the meter reading at the
end of the unlawful usage, an amount of EUR 813.41, which included
EUR 131.45 in VAT, was invoiced for the usage over that period.
Given the legal basis for the invoicing, namely the unlawful usage, the
vrederechter (magistrate) asked Fluvius to take a position on the chargeability of
VAT on the amount invoiced.
2 … [Fluvius takes the following position]:
• Article 5.5.1(5) of the Energiebesluit provides that, when usage takes
place without a supply contract, that usage may be charged to the
owner or user by the network operator.
• Since the relationship between that customer and the distribution
network operator supplying the energy is regulatory in nature, the
unlawful usage does not constitute an unlawful act ….
• VAT is payable on this unlawful usage pursuant to Article 10(2) of the
BTW-Wetboek (VAT Code). According to that article, there is a
supply subject to VAT if there is a transfer of the ownership of
property against payment of a fee pursuant to an order made by or in
the name of a public authority and, more generally, in pursuance of a
law, decree, ordinance, decision or administrative regulation.
3
3.1 … [reference to national case-law which the referring court does not
consider relevant] 3.2 For the period that has been invoiced, the connection regulations of Fluvius
… are relevant …
Those connection regulations say nothing about the level of the fee that will be
charged in the event of unlawful usage or about whether VAT is payable on that
fee. … Article 7.10 … provides as follows:
… Unlawful usage of energy and fees for regularisation Both registered and
possibly unregistered consumption as a result of Unlawful usage will be
subject to a charge by the DNO. …
4 Prior to 1 May 2018, there was no regulatory text expressly stating whether or not
VAT ought to be charged on the fee payable by a person who has used energy
unlawfully. However, since 1 May 2018, after the amendment of the
Energiedecreet (Energy Decree) and the Energiebesluit, rules on the matter have
existed.
Unlawful usage and the fee for such usage are currently regulated by Article 1.1.3,
40° /l, in conjunction with Article 5.1.2 of the Energiedecreet and Article 4.1.2 of
the Energiebesluit.
Article 1.1.3, 40° /1 of the Energiedecreet defines the term ‘energy fraud’ as any
unlawful action by any person, whether active or passive, that is accompanied by
the gaining of an unlawful advantage. The vrederechter is of the view that the
usage of electricity from the network without entering into a commercial
agreement and without reporting it to the distribution network operator can be
regarded as an unlawful action, active or passive, that is accompanied by the
gaining of an unlawful advantage.
Article 5.1.2 of the Energiedecreet also provides that the costs incurred by the
network operator to remedy the energy fraud referred to in Article 1.1.3, 40° /l,
(a), (b), (c), (d) and (g), the costs of the disconnection referred to in the previous
paragraph, the regularisation of the connection or of the metering installation, the
reconnection, the unlawfully gained advantage, the costs related to the unlawfully
gained advantage and the interest are to be borne by the relevant network user. In
addition, the network operator or its mandated representative will recover the
aforementioned costs as well as the unlawfully gained advantage and the interest
directly from the network user.
Article 4.1.2(1) of the Energiebesluit prescribes the way in which the unlawful
advantage must be calculated and which items form part of the unlawfully gained
advantage. The unlawfully gained advantage relates, among other things, to the
evaded costs for the supplied energy (Article 4.1.2(1)(3), 4° of the Energiebesluit).
Article 4.1.2(3) further provides that the fee charged for the unlawfully gained
advantage is determined in a specific manner and includes taxes, levies and VAT.
5 The vrederechter, however, questions whether the provision governing the
charging of VAT is not contrary to Council Directive 2006/112/EC of
28 November 2006 on the common system of value added tax (‘the VAT
Directive’).
In the first place, the vrederechter questions whether Article 2(1)(a) and
Article 14(1) and (2)(a) of the VAT Directive allow VAT to be levied on the fee
payable for the unlawful usage of energy.
Article 2(1)(a) provides that the supply of goods for consideration in a Member
State by a taxable person acting as such is subject to VAT. Article 14(1) adds that
‘supply of goods’ means the transfer of the right to dispose of tangible property as
owner. The following are also regarded as a supply of goods: the transfer, by order
made by or in the name of a public authority or in pursuance of the law, of the
ownership of property against payment of compensation (Article 14(2)(a) of the
VAT Directive).
Can it be inferred from these provisions that the unlawfully used energy must be
regarded as:
• a supply of goods, being the transfer of the right to dispose of tangible
property as owner (Article (2)(1)(a) in conjunction with Article 14(1)
of the VAT Directive),
• or as the transfer of the ownership of property by order made by or in
the name of a public authority or in pursuance of the law
(Article 14(2)(a) of the VAT Directive)?
In the second place, the vrederechter questions whether Article 9(1) and
Article 13(1) of the VAT Directive allow Fluvius, as a body governed by public
law, to claim VAT on the compensation to which it is entitled for the unlawful
usage of energy and, consequently, whether it is a taxable person for VAT
purposes in respect of that unlawful usage.
Article 9(1) of the VAT Directive defines who a taxable person is, namely, any
person who, independently, carries out any economic activity, whatever the
purpose or results of that activity. The exploitation of tangible or intangible
property for the purposes of obtaining income therefrom on a continuing basis will
in particular be regarded as an economic activity.
The first paragraph of Article 13(1) adds that public authorities, including bodies
governed by public law, will not be regarded as taxable persons in respect of the
activities or transactions in which they engage as public authorities, even where
they collect dues, fees, contributions or payments in connection with those
activities or transactions. The third paragraph introduces some nuance to the
previous provision by stating that, in any event, bodies governed by public law
will be regarded as taxable persons in respect of the activities listed in Annex I,
provided that those activities are not carried out on such a small scale as to be
negligible. The supply of gas and electricity is covered by this provision.
Can it be inferred from those provisions that, if Fluvius is entitled to compensation
for unlawfully used energy, it is to be regarded as a taxable person within the
meaning of Article 9(1) of the VAT Directive because the unlawfully used energy
is the result of the exploitation of tangible property for the purposes of obtaining
income therefrom on a continuing basis?
And if that is the case, must the first paragraph of Article 13(1) of the VAT
Directive be understood to mean that Fluvius is a public authority and, if so, does
it then follow from the third paragraph of Article 13(1) of the directive that the
economic activity of Fluvius in connection with the unlawful usage of energy is
on such a significant scale that Fluvius must be regarded as a taxable person for
VAT purposes in connection with that usage?
6 …
… [decision of the referring court] Decision
… [order for the payment of compensation for the unlawfully used energy] and before ruling on the VAT (value added tax) claimed by the mandated
association Fluvius Antwerp, refers this case to the Court of Justice of the
European Union with a view to obtaining answers to the following questions
referred for a preliminary ruling to the Court of Justice of the European Union by
the vrederechter:
‘Must Article 2(1)(a), read in conjunction with Article 14(1) of Directive
2006/112/EC, be interpreted as meaning that the unlawful usage of energy is
a supply of goods, being the transfer of the right to dispose of tangible
property as owner?’
‘If not, must Article 14(2)(a) of Directive 2006/112/EC be interpreted as
meaning that the unlawful usage of energy is a supply of goods, being a
transfer, by order made by or in the name of a public authority or in
pursuance of the law, of the ownership of property against payment of
compensation?’
‘Must Article 9(1) of Directive 2006/112/EC be interpreted as meaning that,
if Fluvius Antwerpen is entitled to compensation for unlawfully used energy,
it is to be regarded as a taxable person since the unlawful usage is the result
of an “economic activity” of Fluvius Antwerpen, namely the exploitation of
tangible property for the purposes of obtaining income therefrom on a
continuing basis?’
‘If Article 9(1) of Directive 2006/112/EC must be interpreted as meaning
that the unlawful usage of energy constitutes an economic activity, must the
first paragraph of Article 13(1) of Directive 2006/112/EC then be
interpreted as meaning that Fluvius Antwerpen is a public authority and, if
so, must the third paragraph of Article 13(1) then be interpreted as meaning
that the unlawful usage of energy is the result of an activity of Fluvius
Antwerpen that is not carried out on such a small scale as to be negligible?’
… [closing formula]

Source: Curia

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