ECJ Rules Compensation Payments for Public Transport Not Subject to VAT Liability

• The German Federal Fiscal Court ruled that state grants for local public transport are not subject to VAT.
• The ruling allowed municipalities to keep the full grant without paying VAT and did not reduce input VAT deduction.
• The ECJ case C-615/23 involved a Polish public transport company receiving loss compensation payments.
• The ECJ concluded that these compensation payments are not subject to VAT as they do not constitute consideration from a third party.
• The ECJ specified that a subsidy is subject to VAT only if it is directly linked to the price of a specific supply, enables a lower price, and its remuneration is determinable.
• The compensation payment in the Polish case did not directly affect ticket prices and was not linked to specific transport services.
• The subsidy was based on the number of kilometers covered, not on the number of passengers or service intensity.

Source: kmlz.de

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.

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