EU Court Rules Transport Compensation Not Subject to VAT as It’s Not a Service Payment

Compensation paid by a local entity to a transport company for losses in public transport services is not subject to VAT.
The EU Court of Justice ruled on this in case C-615/23.
A Polish company plans to contract with a local entity for public transport services.
Ticket prices set by the local entity do not cover operational costs.
The local entity compensates the company for losses.
The national judge asked if this compensation is a payment for transport services and subject to VAT.
According to EU Directive 2006/112, VAT includes all payments for services, including subsidies directly linked to the price.
For a subsidy to be directly connected to the price, it must be specifically paid to the operator for a determined service, affect the buyer’s price, and be determinable.
The EU Court found the compensation is not specifically for a determined service and does not affect the price paid by the recipient.
The compensation is based on vehicle/kilometer usage, not actual service use.
The compensation does not qualify as a payment from a third party.
The case differs from case C-151/13, where compensation was considered a payment.

Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.