- The compensation paid by a local authority 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 on May 8.
- The case involved a Polish company planning a contract with a local authority for public transport services.
- Ticket prices set by the local authority are insufficient to cover costs, leading to compensation for losses.
- The national court asked if this compensation is a payment for 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 paid specifically for a service, affect the buyer’s price, and be determinable.
- The EU Court found the compensation is not specifically for a service to a determined recipient and does not affect the ticket price.
- The compensation is based on vehicle kilometers, not service usage, and is granted after the fact.
- The compensation does not qualify as a payment from a third party.
- The case is not comparable to case C-151/13, Le Rayon d’Or, involving a different type of payment.
Source: eutekne.info
Other sources
- CJEU Ruling on VAT Taxable Base: In case C-615/23, the Court of Justice of the European Union ruled that compensation paid by a local authority to a public transportation provider does not constitute a VAT taxable base if the ticket price does not decrease proportionally with the compensation.
- Context of the Case: P. S.A., a passenger transport company, entered into a contract with a local authority that set ticket prices, resulting in financial losses for P. S.A. The local authority agreed to compensate the company to ensure financial viability.
- Compensation Characteristics: The CJEU determined that the compensation does not directly affect ticket prices and is intended to cover losses rather than subsidize the price of services. It clarified that the compensation is retroactive and independent of actual service usage, thus not qualifying as a subsidy linked to the price under VAT regulations.
Source PwC
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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.
