Opinion of Advocate General Kokott delivered on 10 November 2022.

• Jurisdiction: European Union
• ECLI: ECLI:EU:C:2022:875
• Date: 10 November 2022
• Celex Number: 62021CC0616
• Court: Court of Justice (European Union)

Provisional text

OPINION OF ADVOCATE GENERAL

KOKOTT

delivered on 10 November 2022 (1)

Case C‑616/21

Dyrektor Krajowej Informacji Skarbowej

v

Gmina L.

(Request for a preliminary ruling from the Naczelny Sąd Administracyjny (Supreme Administrative Court, Poland))

(Request for a preliminary ruling – Tax legislation – Value added tax – Directive 2006/112/EC – Articles 2, 9 and 13 – Services for consideration – Meaning of ‘taxable person’ – Economic activity – Typological approach – A body governed by public law which arranges for asbestos removal in its territory at no cost to residents, which receives a subsidy from a fund for this purpose – No significant distortions of competition)

I. Introduction

1. The removal of dangerous contaminants such as products containing asbestos by a municipality not only serves to protect the health of residents, but also raises interesting questions in terms of value added tax (VAT). If the residents concerned had themselves commissioned a company to carry out the removal, the VAT assessment would be clear. The business provides them with an assessable and taxable service. The State receives the corresponding VAT. A State subsidy for 100% of the costs to the residents would have no relevance in terms of VAT law.

2. But what about when a municipality organises for this waste to be disposed of by a company it has commissioned, free of charge to the residents concerned, and it is then reimbursed, in whole or in part, by a third party (in this case, a State fund) for the costs it initially incurred? Here, too, the State receives its VAT at least once, specifically from the asbestos removal company. However, if the municipality receives a subsidy of between 40% and 100% from State resources, does this lead to further VAT being incurred because the municipality is providing a further assessable and taxable service to the residents?

3. The consequence of the resulting chain of supply (service provided by the asbestos removal company via the municipality to the resident) would be that the municipality would have to pay this VAT but could in principle claim an input tax deduction from the input supply. If the subsidy is as high as the input costs, this amounts to a ‘zero-sum game’ involving a great deal of administrative effort. If the subsidy is lower (or not included within the taxable amount), an input tax surplus would remain, which would reduce the tax revenue. If the subsidy is higher, additional tax revenue would be generated via a State support programme. None of these options seem appropriate, especially when the municipality’s objective (environmental protection, health protection, hazard prevention), which also benefits the general public and not just the residents, is also considered.

4. The VAT assessment of municipal asbestos removal subsidised by State funds raises some fundamental VAT questions which the Court must answer in this request for a preliminary ruling. Among other things, it must be clarified how the recipient and the provider of a service are to be identified. Equally fundamental is the question of whether a municipality – assuming it would be a provider of a service – is carrying out an economic activity in such a case.

II. Legal context

A. European Union law

5. Article 2(1)(c) of Directive 2006/112/EC on the common system of value added tax (‘the VAT Directive’) (2) provides:

‘The following transactions shall be subject to VAT:

(c) the supply of services for consideration within the territory of a Member State by a taxable person acting as such’.

6. Article 9(1) of the VAT Directive provides:

‘“Taxable person” shall mean any person who, independently, carries out in any place any economic activity, whatever the purpose or results of that activity.

Any activity of producers, traders or persons supplying services, including mining and agricultural activities and activities of the professions, shall be regarded as “economic activity”. The exploitation of tangible or intangible property for the purposes of obtaining income therefrom on a continuing basis shall in particular be regarded as an economic activity.’

7. Article 13 of the VAT Directive, on the other hand, states:

‘1. States, regional and local government authorities and other bodies governed by public law shall not be regarded as taxable persons in respect of the activities or transactions in which they engage as public authorities, even where they collect dues, fees, contributions or payments in connection with those activities or transactions.

However, when they engage in such activities or transactions, they shall be regarded as taxable persons in respect of those activities or transactions where their treatment as non-taxable persons would lead to significant distortions of competition.

In any event, bodies governed by public law shall be regarded as taxable persons in respect of the activities listed in Annex I, provided that those activities are not carried out on such a small scale as to be negligible.

2. Member States may regard activities, exempt under Articles 132, 135, 136, 371, 374 to 377, and Article 378(2), Article 379(2), or Articles 380 to 390, engaged in by bodies governed by public law as activities in which those bodies engage as public authorities.’

8. Article 28 of the VAT Directive concerns the commissioning of services and reads:

‘Where a taxable person acting in his own name but on behalf of another person takes part in a supply of services, he shall be deemed to have received and supplied those services himself.’

9. Article 73 of the VAT Directive governs the taxable amount:

‘In respect of the supply of goods or services, other than as referred to in Articles 74 to 77, the taxable amount shall include everything which constitutes consideration obtained or to be obtained by the supplier, in return for the supply, from the customer or a third party, including subsidies directly linked to the price of the supply.’

B. Polish law

10. The Republic of Poland adopted the VAT Directive through the Ustawa z dnia 11 marca 2004 r. o podatku od towarów i usług (Law of 11 March 2004 on Tax on Goods and Services, Dz. U. of 2018, item 2174, as amended; ‘the Law on VAT’).

11. Article 29a(1) of the Law on VAT relates to the taxable amount and provides that:

‘Subject to paragraphs 2, 3 and 5, Articles 30a to 30c, Article 32, Article 119 and Article 120(1), (4) and (5), the taxable amount shall be everything that constitutes consideration which the supplier of goods or services has received or is to receive on account of a sale from the purchaser, customer or a third party, including subsidies, subventions and other similar amounts received which have a direct effect on the price of the goods or services supplied by the taxable person.’

12. The Ustawa z dnia 8 marca 1990 r. o samorządzie gminnym (Law of 8 March 1990 on Municipal Local Government, Dz. U. of 2020, item 713, as amended; ‘Law on Municipal Local Government’) provides in Article 7(1) that:

‘The municipality’s own tasks shall include meeting the collective needs of the community. Own tasks shall, in particular, include matters relating to:

1) spatial planning, property management, environmental protection, nature conservation and water management; …

5) healthcare; …

13. The Ustawa z dnia 27 kwietnia 2001 r. Prawo ochrony środowiska (Environmental Protection Law of 27 April 2001, Dz. U. of 2020, item 1219, as amended; ‘Environmental Protection Law’) provides in Article 400(2) that:

‘Provincial funds for environmental protection and water management, hereinafter referred to as “provincial funds”, are local government legal persons within the meaning of Article 9(14) of the Law referred to in paragraph 1 (that is to say, the Ustawa z dnia 27 sierpnia 2009 r. o finansach publicznych (the Law of 27 August 2009 on Public Finance, Dz. U. of 2019, item 869, as amended)).’

14. Article 400b(2) and (2a) of the Environmental Protection Law provides that:

‘(2) The purpose of provincial funds shall be to fund environmental protection and water management within the scope set forth in Article 400a(1)(2), (1)(2a), (1)(5) to (1)(9a), (1)(11) to (1)(22) and (1)(24) to (1)(42).

(2a) The purpose of the National Fund and of provincial funds shall also be to create conditions for the implementation of funding for environmental protection and water management, in particular by supporting and promoting activities aimed at such implementation as well as by cooperating with other entities, including local government units, entrepreneurs and entities established outside the Republic of Poland.’

15. The provisions on the removal of asbestos are set out in an act of parliament. (3) A resolution of the Council of Ministers establishing a multiannual programme called the ‘National Programme for the Removal of Asbestos for 2009-2032’ was adopted on 14 July 2009. (4) The resolution lists the tasks set by the European Union in a multiannual perspective, stipulating the objectives as well as the legislative, financial and organisational framework for the programme. It imposes an obligation on local government units to develop programmes for the removal of products containing asbestos.

16. On 26 April 2019, the City Council of L., acting pursuant to the Environmental Protection Law, adopted by way of Resolution 227/VI/2019 the ‘Update of the Programme for the Removal of Asbestos in the City of L. for 2018-2032’. Its implementation was entrusted to the Mayor of the City of L. Ordinance 62/9/2019 of the Mayor of the City of L. of 23 September 2019 laid down the implementation rules. Pursuant to the annex to the resolution of the City Council of L., the activities related to asbestos removal include the removal of products and disposal of waste containing asbestos from the area of L.

III. Facts and preliminary ruling procedure

17. Gmina L. (Municipality of L., Poland; ‘the Municipality’) is a local government unit that performs its...