Splitting contractual services makes no sense

Andrzej Kapczuk, tax adviser, partner at Thedy & Partners was asked to comment on this position of the court. He emphasised in his commentary that the WSA’s argumentation in the judgment was carried out in two ways. On the one hand, the court held that the PKWiU classification of property management services itself – although narrowed by the key tag ‘ex’ – is sufficiently capacious to also include ongoing maintenance and technical emergency services. On the other hand, in the light of the ruling, the entirety of the services provided to the housing association may be deemed to be a comprehensive (complex) service within the meaning of VAT, and thus the same taxation rules apply to it. In this case, VAT exemption. As an aside, it is worth juxtaposing this with the fact that the CJEU has repeatedly emphasised that VAT exemptions should be interpreted strictly and not broadly. However, as the WSA stated – by its very nature, property management as a service does not consist of a single activity, but multiple activities. This also follows from the wording of the provisions of the Real Estate Management Act. It must nevertheless be emphasised that management contracts may differ significantly from one another and therefore lead to different tax consequences. In this case, it seems that the fact of the specific principle of calculation of remuneration for the analysed services was not without significance for the court’s decision. Similar services provided to communities, housing cooperatives or yet other entities – under different contractual constructions – may already be taxed differently. Significantly, the application of the exemption to all services means at the same time no right to deduct VAT on services provided by subcontractors. And this, of course, is of key importance when service providers use such subcontractors – as opposed to relying on their own personnel and equipment.
The entire article can be read in Rzeczpospolita of 12 April 2023, page H7