Dyrektor Krajowej Informacji Skarbowej v P. S.A (C-615/23)

Contents

Judgment of the Court (First Chamber)8 May 2025^note(Reference for a preliminary ruling — Taxation — Common system of value added tax (VAT) — Directive 2006/112/EC — Article 73 — Taxable amount — Consideration — Subsidies directly linked to the price of a taxable transaction — Collective public transport services — Compensation paid by a local authority to the service provider to cover the costs incurred — Direct link between the compensation and the services provided)In Case C‑615/23,REQUEST for a preliminary ruling under Article 267 TFEU from the Naczelny Sąd Administracyjny (Supreme Administrative Court, Poland), made by decision of 16 June 2023, received at the Court on 6 October 2023, in the proceedingsDyrektor Krajowej Informacji SkarbowejvP. S.A.,THE COURT (First Chamber),composed of F. Biltgen, President of the Chamber, T. von Danwitz, Vice-President of the Court, acting as Judge of the First Chamber, A. Kumin (Rapporteur), I. Ziemele and S. Gervasoni, Judges,Advocate General: J. Kokott,Registrar: A. Calot Escobar,having regard to the written procedure,after considering the observations submitted on behalf of:– the Dyrektor Krajowej Informacji Skarbowej, by B. Rogowska‑Rajda, T. Tratkiewicz and T. Wojciechowski,– the Polish Government, by B. Majczyna, acting as Agent,– the Hungarian Government, by M.Z. Fehér and R. Kissné Berta, acting as Agents,– the European Commission, by O. Glinicka and M. Herold, acting as Agents,after hearing the Opinion of the Advocate General at the sitting on 13 February 2025,gives the following

Judgment

1This request for a preliminary ruling concerns the interpretation of Article 73 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax (OJ 2006 L 347, p. 1; ‘the VAT Directive’).

2The request has been made in proceedings between the Dyrektor Krajowej Informacji Skarbowej (Director of National Tax Information, Poland) (‘the tax authority’) and the company P. S.A. concerning the taxable amount for value added tax (VAT) purposes in relation to the supply of the collective public transport services which P. intends to provide.

Legal context

European Union law

3Article 73 of the VAT Directive provides:‘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.’

Polish law

4Article 29a(1) of the ustawa o podatku od towarów i usług (Law on the tax on goods and services) of 11 March 2004 (Dz. U. of 2004, No 54, item 535), in the version applicable to the dispute in the main proceedings, provides:‘Subject to paragraphs 2 to 5, Articles 30a to 30c, Article 32, Article 119 and Article 120(4) and (5), the taxable amount shall include everything that constitutes consideration which the supplier of goods or services has obtained or is to obtain on account of a sale from the purchaser, customer or a third party, including grants, subsidies and other sums of a similar nature received which have a direct effect on the price of the goods or services supplied by the taxable person.’

5Under Article 50(1) of the ustawa o publicznym transporcie zbiorowym (Law on collective public transport) of 16 December 2010 (Dz. U. of 2018, item 2016), in the version applicable to the dispute in the main proceedings (‘Law on collective public transport’):‘The funding of public utility transport may, inter alia, take the form of:…(2) compensation paid to the operator for:…(c) the costs it incurs in providing the collective public transport services …’

The dispute in the main proceedings and the question referred for a preliminary ruling

6P. is active in the field of passenger transport. It intends to conclude, as an operator, contracts for the provision of collective public transport services, as provided for in Regulation (EC) No 1370/2007 of the European Parliament and of the Council of 23 October 2007 on public passenger transport services by rail and by road and repealing Council Regulations (EEC) Nos 1191/69 and 1107/70 (OJ 2007 L 315, p. 1), and in the Law on collective public transport. The other party to the contract, namely a local authority, will be an organiser of collective public transport within the meaning of that law (‘the organiser’).

7In the context of the proposed activity, P. will be remunerated, inter alia, by the sale of tickets, the price of which will be determined by the organiser. Since that financing method is not sufficient to cover the costs of that activity, the organiser will pay P. compensation, within the meaning of Article 50(1)(2)(c) of the Law on collective public transport.

8The contract concluded with the organiser will set out the arrangements for payment of the compensation, the basis of which is the financial shortfall resulting from that activity, and will specify the maximum amount of compensation for a given period.

9It is in that context that P. applied to the tax authorities for an advance tax ruling on whether the compensation for losses resulting from the supply of collective public transport services constitutes turnover subject to VAT, within the meaning of Article 29a(1) of the Law on the tax on goods and services, in the version applicable to the dispute in the main proceedings.

10According to P., the compensation does not increase the taxable amount because it does not have a direct effect on the price of the services supplied but constitutes a contribution to all the costs of the planned activity.

11In an advance tax ruling of 14 May 2019, the tax authority expressed an opinion contrary to that view.

12P. brought an action against that advance tax ruling before the Wojewódzki Sąd Administracyjny w Gdańsku (Regional Administrative Court, Gdańsk, Poland), which annulled it by judgment of 26 November 2019.

13Subsequently, P. brought an appeal on a point of law against that judgment before the Naczelny Sąd Administracyjny (Supreme Administrative Court, Poland), which is the referring court.

14That court is uncertain as to whether the compensation paid by a local authority to an undertaking supplying collective public transport services in order to cover the costs incurred by that undertaking constitutes consideration for that supply of services, within the meaning of Article 73 of the VAT Directive, so that it must be subject to VAT.

15In that regard, the referring court states that, in the light of the case-law of the Court, in particular the judgments of 22 November 2001, Office des produits wallons (C‑184/00, EU:C:2001:629), and of 15 July 2004, Commission v Sweden (C‑463/02, EU:C:2004:455), the view has been taken in national case-law that such compensation does not form part of the taxable amount. In order for the amount of financing obtained by a taxable person to be regarded as an element of the taxable amount of a supply of goods or services, that amount must be clearly allocated to a specific transaction. The compensation at issue in the case before it has no direct effect on the price of the services provided by P., namely the price of tickets, its purpose being primarily to cover losses incurred during a given period.

16However, referring to the judgment of 27 March 2014, Le Rayon d’Or (C‑151/13, EU:C:2014:185), the referring court expresses doubts concerning that national case-law. In that regard, it asks whether, in order to determine whether such compensation forms part of the taxable amount for VAT purposes, there must be a direct link between the price of tickets and that compensation, understood as meaning direct financial support for tickets which reduces their price proportionately, or whether it is sufficient, in order to establish that direct link, to find that, without that compensation, the price of those tickets would have to be higher. In addition, that court is uncertain whether the existence of such a direct link may be inferred from the fact that the services provided by the supplier are characterised by their continuity and the permanent availability of that supplier to provide them.

17According to the referring court, while there is no doubt that, in the case before it, the compensation envisaged does not relate to an individual service intended for the recipients of that service, the fact remains that that compensation reduces the price to be paid by such recipients, since, without it, the price of tickets sold by the operator of the public transport service would have to be set at a much higher level. Furthermore, that compensation is not a financial service intended to cover all that operator’s activities, but is linked solely to the operator’s public transport activity.

18By contrast, according to the referring court, the fact that the compensation envisaged is fixed at a flat rate and on an annual basis does not appear to be of decisive importance in determining whether that compensation forms part of the taxable amount for VAT purposes. That is also true of the fact that the price of tickets and the amount of any reduced fares are determined by the organiser, and not by that operator, given that those elements are also defined in the contract concluded between them and that they affect the determination of the amount of compensation.

19In those circumstances, the Naczelny Sąd Administracyjny (Supreme Administrative Court) decided to stay the proceedings and to refer the following question to the Court of Justice for a preliminary ruling:‘Must Article 73 of [the VAT Directive] be interpreted as meaning that compensation, such as that described in the application for an advance tax ruling, paid to a separate entity (operator) by a local authority for the provision of [collective] public transport services, is included in the taxable amount referred to in that provision?’

Consideration of the question referred

20By its question, the referring court asks, in essence, whether Article 73 of the VAT Directive must be interpreted as meaning that the flat-rate compensation paid by a local authority to an undertaking providing collective public transport services and intended to cover the losses incurred in connection with the supply of those services is included in the taxable amount of that undertaking.

21According to Article 73 of the VAT Directive, the taxable amount for the supply of goods or services ‘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’.

22At the outset, it should be noted that, according to the information in the order for reference and the written observations of the tax authorities, the direct beneficiaries of the collective public transport services which the operator of those services intends to supply are the users of those services, who purchase a ticket as consideration for those services, whereas the organiser paying the compensation to that operator is not regarded as the customer in receipt of that service. Thus, in the present case, that organiser is a ‘third party’, within the meaning of Article 73.

23As regards the question whether that compensation constitutes a subsidy directly linked to the price of the supply, within the meaning of Article 73 of the VAT Directive, it is apparent from the case-law of the Court that, by providing that the taxable amount for VAT purposes includes, in the cases which it determines, certain subsidies paid to taxable persons, Article 73 is intended to subject the full value of goods or services to VAT and hence to prevent payment of a subsidy entailing a lower return from the tax (see, by analogy, judgment of 9 October 2019, C and C (VAT and agricultural subsidies), C‑573/18 and C‑574/18, EU:C:2019:847, paragraph 30 and the case-law cited).

24In accordance with its terms, that provision applies where the subsidy is directly linked to the price of the supply in question. For that to be the case, the subsidy must first be paid specifically to the subsidised operator to enable it to supply particular goods or services. Only in that case can the subsidy be regarded as consideration for the supply of goods or services and therefore be taxable (see, by analogy, judgment of 9 October 2019, C and C (VAT and agricultural subsidies), C‑573/18 and C‑574/18, EU:C:2019:847, paragraph 31 and the case-law cited).

25Moreover, it is necessary to verify that the purchasers of the goods or services benefit from the subsidy granted to the recipient. The price payable by the purchaser must be fixed in such a way that it diminishes in proportion to the subsidy granted to the seller or supplier of the goods or services, which therefore constitutes an element in determining the price demanded by the latter. Thus, it must be ascertained whether, objectively, the fact that a subsidy is paid to the seller or supplier allows the latter to sell the goods or supply the services at a price lower than he or she would have to demand in the absence of subsidy (see, by analogy, judgment of 9 October 2019, C and C (VAT and agricultural subsidies), C‑573/18 and C‑574/18, EU:C:2019:847, paragraph 32 and the case-law cited).

26Moreover, the consideration represented by the subsidy must, at the very least, be identifiable (see, by analogy, judgment of 9 October 2019, C and C (VAT and agricultural subsidies), C‑573/18 and C‑574/18, EU:C:2019:847, paragraph 33 and the case-law cited).

27Accordingly, ‘subsidies directly linked to the price’ for the purposes of Article 73 of the VAT Directive include only subsidies which constitute the whole or part of the consideration for a specific supply of goods or services and which are paid by a third party to the seller or supplier (see, by analogy, judgment of 9 October 2019, C and C (VAT and agricultural subsidies), C‑573/18 and C‑574/18, EU:C:2019:847, paragraph 34 and the case-law cited).

28In the present case, it is apparent from the order for reference that the collective public transport services at issue in the main proceedings are to be provided on the basis of a contract concluded between a local authority, acting as organiser, which will set the price of tickets, and P., acting as an operator. Since the revenue generated, notably by the sale of tickets, will not suffice to cover the costs of those services, the local authority will pay P. compensation at a flat-rate, the amount of which cannot exceed that corresponding to the shortfall stemming from those services and, in any event, a maximum amount fixed for a given period.

29As the referring court has found, such compensation has no direct effect on the price of the transport services provided, set by the organiser of those services, the purpose of that compensation being above all to cover the losses linked to that activity.

30In those circumstances, it must be held that compensation such as that at issue in the main proceedings is not specifically paid to the operator in order for it to carry out a transport service for a particular recipient of that service and has no influence on the price to be paid by that customer, since that price is not fixed in such a way that it diminishes in proportion to the compensation paid to the provider of that service. By contrast, as the Advocate General observed, in essence, in point 54 of her Opinion, that compensation is granted ex post and is independent of the actual use of the transport services, but depends on the number of vehicle-kilometres offered. Therefore, such compensation is not covered by the concept of ‘subsidies directly linked to the price’ within the meaning of Article 73 of the VAT Directive.

31That conclusion is not called into question by the fact that, without such compensation, which makes it possible to reduce significantly the price of the service provided, the price of tickets will have to be higher for the recipients of that service.

32As the Advocate General observed in point 58 of her Opinion, it must be held that, necessarily, any subsidy is capable of having an effect on the calculation of prices, whether that is carried out by the recipient of the subsidy or, as in the present case, by the organiser paying that subsidy. As is apparent from the case-law of the Court, the mere fact that financing may affect the price of the goods or services supplied by the body in receipt of that financing is not enough to make it taxable as a subsidy directly linked to the price, for the purposes of Article 73 of the VAT Directive (see, to that effect, judgment of 22 November 2001, Office des produits wallons, C‑184/00, EU:C:2001:629, paragraph 12).

33That said, subsidies directly linked to the price of a taxable supply are only one situation amongst others referred to in Article 73 of the VAT Directive, the taxable amount in respect of a supply of services being, in any event, composed of everything which makes up the consideration for the service (see, by analogy, judgment of 27 March 2014, Le Rayon d’Or, C‑151/13, EU:C:2014:185, paragraph 30 and the case-law cited).

34In that context, referring to that latter judgment, the referring court asks, in essence, whether compensation such as that at issue in the main proceedings must be regarded as consideration obtained from a third party, within the meaning of Article 73.

35The case which gave rise to that judgment concerned the taxable nature of a ‘healthcare lump sum’ which a national sickness insurance fund paid to residential care homes for the elderly for the provision of medical and paramedical services to their residents and the calculation of which took account, inter alia, of the number of residents hosted in each establishment and their dependency level. In the same judgment, the Court held that there was a direct link between the supply of services by such an establishment to its residents and the consideration received, namely that ‘healthcare lump sum’, with the result that such a lump sum payment constituted consideration for the healthcare services provided for consideration by that establishment to its residents and, on that basis, fell within the scope of VAT.

36The Court has stated, in that regard, that the fact that the direct beneficiary of the services in question is not the national sickness insurance fund which pays the lump sum, but the person insured by that fund, is not such as to break the direct link between the supply of services made and the consideration received (judgment of 27 March 2014, Le Rayon d’Or, C‑151/13, EU:C:2014:185, paragraph 35).

37In addition, the Court has held that, where the supply of services in question is characterised, inter alia, by the permanent availability of the service provider to supply, at the appropriate time, the healthcare services required by the residents, it is not necessary, in order to recognise that there is a direct link between that service and the consideration received, to establish that a payment relates to a personalised supply of healthcare at a specific time carried out at the request of a resident (judgment of 27 March 2014, Le Rayon d’Or, C‑151/13, EU:C:2014:185, paragraph 36).

38It must be held that the situation at issue in the main proceedings and that giving rise to the case which resulted in the judgment of 27 March 2014, Le Rayon d’Or (C‑151/13, EU:C:2014:185), are not comparable.

39As the Advocate General observed in points 52 and 56 of her Opinion, there was, in that case, a direct link between the healthcare services provided to the residents of the residential care home for the elderly and the financial consideration paid to that establishment, determined on the basis of the care received and the number of residents concerned. In the present case, collective public transport services benefit not clearly identifiable individuals, but all potential passengers. In addition, the compensation is calculated without taking into account the identity and number of users of the service supplied.

40In the light of all the foregoing considerations, the answer to the question referred is that Article 73 of the VAT Directive must be interpreted as meaning that the flat-rate compensation paid by a local authority to an undertaking providing collective public transport services and intended to cover losses incurred in connection with the supply of those services is not included in the taxable amount of that undertaking.

Costs

41Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the referring court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable.

Operative part

On those grounds, the Court (First Chamber) hereby rules: Article 73 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added taxmust be interpreted as meaning that the flat-rate compensation paid by a local authority to an undertaking providing collective public transport services and intended to cover losses incurred in connection with the supply of those services is not included in the taxable amount of that undertaking.