Supreme Administrative Court: Sale of service — Construction service — Total maintenance service — Life cycle contract — Geothermal plant — Redemption of the plant

A Oy sold heating energy solutions by implementing a life-cycle contract for geothermal plants on properties owned or managed by customers. The geothermal system produced thermal energy for the needs of the customer’s property. Based on the life cycle contract, the company was responsible for the design, construction, maintenance and operation of the geothermal plant for the duration of the contract. The intended duration of the life-cycle contracts was 20 — 30 years. After the end of the deadline according to the agreement, the agreement continued to be valid until further notice, unless the customer redeemed the geothermal plant. The geothermal plant can be redeemed no earlier than 10 years after its completion.

The Supreme Administrative Court considered the design, contracting, maintenance and operation of a geothermal plant to be a service package forming a lifecycle contract. The sale included in the maintenance and operation of the geothermal plant was not to be considered as the sale of the construction service referred to in section 29, subsection 1, point 1 of the VAT Act. When, in addition to the service package formed by the life-cycle contract, the long duration of the contract and its continuity, as well as the amount of the consideration, which becomes more specific during the long contract period, were taken into account, the sale carried out by the life-cycle contract had to be considered as a total care service referred to in section 29, subsection 2 of the VAT Act. The redemption of the geothermal plant did not have to be assessed in value added tax as a separate and independent performance from the total maintenance service according to the life cycle contract.

The compensation to be charged on the basis of the life-cycle contract was thus to be considered consideration for the transfer of the total care service referred to in Section 29, subsection 1, point 10 of the Value Added Tax Act, both for the compensation charged during the life-cycle contract and for the redemption compensation charged in connection with the redemption.

Source: finlex.fi

---

---