HomeIco

Home

 GlobalIco

Global

 ContactIco

Contact
de|en|pl

We use cookies to personalise the website and offer you the greatest added value. They are, among other purposes, used to analyse visitor usage in order to improve the website for you. By using this website, you agree to their use. Further information can be found in our data privacy statement.
Good to know Change of approach in VAT accounting by LGUs installing RES systems for residents or removing asbestos

Change of approach in VAT accounting by LGUs installing RES systems for residents or removing asbestos

PrintMailRate-it

​​​​​​​​​​​by Jakub Wajs

10 May 2024


On 2 May 2024, a general advance tax ruling on: “Taxation of transactions carried out by local government units: installation of renewable energy systems and removal of asbestos” was issued. 

What is the ruling about?


The ruling resolves two VAT issues:

  • installation of RES systems,
  • removal of waste containing asbestos.

The ruling clarifies what taxes apply if local government units carry out these transactions, as well as their obligations in terms of making tax adjustments and adjusting practice for the future.

CJEU judgments being the basis for the ruling


The ruling is based on the CJEU judgments of 30 March 2023 in cases C-612/21 Gmina O. (Municipality of O.) and C-616/21 Gmina L. (Municipality of L.). 

The CJEU pointed to the following circumstances:

  1. The service must be provided in return for payment – in this context, the CJEU noted, among other things, that when a municipality recovers, through the contributions it receives, only a small part of the costs which it has incurred, the balance being financed by public funds, such a difference between those costs and the amounts received in return for the services offered suggests that these contributions must be regarded more as a fee than as consideration. This is even more so when no consideration is paid by the service recipients. 
  2. The service must be provided in the course of an economic activity so that a service provider can be regarded as a taxable person – in this context, the CJEU noted, among other things, that the activities carried out by the municipalities are limited to the implementation – within the framework of specific programmes – of activities which, by definition, are not of a repetitive (regular) nature.

Main conclusions


CJEU’s judgments and subsequent national case law based on those judgments indicate that such activities should in principle be considered as not being subject to VAT.

In cases where activities concerning the supply and installation of RES systems or the removal of products and waste containing asbestos carried out by local government units (LGUs) in circumstances analogous to those in the cases heard by the CJEU have been taxed by the LGU and the tax due in respect thereof has been paid – the LGU is entitled to make an adjustment in this regard.

The LGU, while making an adjustment to output tax, is at the same time obliged to adjust accordingly the input tax previously deducted from output tax included in all expenses related to the implementation of these programmes.

Making adjustments to output tax and input tax also requires verifying the so-called 'pro rata VAT ratio' (Article 86(2a) of the VAT Act).

Making a tax adjustment may also require LGUs to adjust their accounts with institutions financing the installation of RES systems and asbestos removal.

Check what you should pay attention to in respect of accounts already settled


In the context of accounts already settled, in view of the constitutional principles (trust in the State and equal treatment) and the unambiguous position of the tax authorities with regard to the VAT treatment of the supply and installation of RES systems and the removal of products and waste containing asbestos to date – LGUs may, but do not have to, adjust the accounts.

Check what you should pay attention to in respect of future accounts


In the context of future accounts, LGUs should adjust their VAT accounts for the above mentioned activities until 31 August 2024 . If VAT taxation with a simultaneous right of deduction is applied until that date, such VAT accounts should not be challenged.

Summary


Local government units therefore face the challenge of:

  • analysing the viability of adjusting existing accounts;
  • bringing the practice into line with the legal requirements by 31 August 2024. The busy period will therefore fall during the holiday season.

If you represent a municipality that has accounted for the output tax for the installation of RES systems for residents or carried out asbestos removal, please contac​t us.

Contact

Contact Person Picture

Jakub Wajs

Attorney at law (Poland), Tax adviser (Poland)

Senior Associate

Send inquiry

Profile

​
Deutschland Weltweit Search Menu