Municipalities do not have to charge VAT for RES installations and asbestos removal
Municipalities that decide to implement projects either entirely (as in the case of asbestos removal) or in significant part (as in the case of RES installations) with external public funds within their agglomerations do not have to charge VAT. This was the position taken by the CJEU in judgments C-612/21 and C-616/21.
The above rulings have a common denominator, viz:
– implementation of own tasks by each municipality,
– lack of regular income from the task in question,
– the municipalities do not intend to provide the services described in the judgments on a regular basis – the lack of permanence of the services and the
– covering the costs of its implementation either in full (as in the case of asbestos removal) or in significant part (as in the case of RES installations) from external public funds.
What the cases were about:
Case C 612/21 concerned the implementation by municipalities of projects for the installation of renewable energy sources (RES) financed in part by subsidies. In RES projects, residents had to pay 25 per cent of the installation costs, with the remainder covered by the municipality through EU funding. Case C 616/21 concerned the carrying out of works to remove products and waste containing asbestos from residential and commercial buildings, with the exception of properties on which commercial activities are carried out. The municipality then intended to obtain grants from this fund of between 40% and 100% of the expenditure incurred.
Prior to the cases before the CJEU, the practice of taxing similar projects financed in whole or in part by grants varied. In many cases, municipalities taxed VAT on both the residents’ contributions and the grants received.
In these judgments, the CJEU considered such an approach to be inappropriate, holding, inter alia, that on the basis of the facts presented, the criterion of the municipality acting as a taxable person (i.e. no economic activity) is not met and the municipality does not carry out activities falling within the scope of Directive 2006/112. This, in turn, effectively means no VAT taxation.
– On the basis of the above rulings, municipalities that have settled VAT in identical or similar projects now have an additional argument and may be tempted to correct their settlements – comments Łukasz Woźniak, manager at Thedy & Partners.