Tax Advisor: The CJEU concludes that activities entrusted by a municipality to third parties do not constitute a supply of goods and services subject to VAT

The Court of Justice of the European Union (CJEU) issued two rulings on March 30^th, concluding that the fact that a municipality delivers and installs, through a company, renewable energy systems to those of its residents who are property owners and who have expressed the wish to be equipped with them does not constitute a supply of goods and services subject to VAT. Nor does the fact that a municipality commissions a company to carry out asbestos removal operations and the collection of asbestos products and waste for the benefit of those of its residents. This is because both activities do not have the objective of obtaining continuous income over time due to their financing with public funds.

When a municipality only recovers, through the contributions it collects, a minimal part of the expenses incurred and the rest is borne by public funds, a difference of such importance between such expenses and the amounts received as consideration for the services offered tends to suggest that these contributions should be assimilated to a greater extent to a fee than to a remuneration as such.

The Chamber’s judgment therefore rules that articles 2.1, 9 and 13. 1 of Directive 2006/112/EC must be interpreted in such a way that the fact that a municipality supplies and installs, through a company, renewable energy systems to those of its residents who own property and who have expressed the wish to be equipped with them does not constitute a supply of goods and a supply of services subject to VAT, when such activity is not intended to obtain continuous income over time and only gives rise, on the part of those residents, to a payment covering, at most, a quarter of the costs incurred, the remainder being financed by public funds.

On the other hand, an activity is generally qualified as economic when it is of a permanent nature and is carried out in exchange for remuneration for the author of the operation. That is why it does not constitute a supply of services subject to VAT when a municipality commissions a company to carry out asbestos removal and collection of asbestos products and waste for the benefit of those of its residents who are property owners and who have expressed an interest in doing so.

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