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Municipalities as VAT taxable persons in the context of projects aimed at promoting RES


by Jakub Wajs and Piotr Gajewski

22 April 2021


On 16 April 2021, the Supreme Administrative Court (SAC) issued a decision in which it referred the following requests for a preliminary ruling to the Court of Justice of the European Union (file no. I FSK 1645/20):


  1. Does a municipality (a public authority) act as a VAT taxable person when implementing a project whose aim is to increase the use of renewable energy sources by undertaking, under a civil-law contract made with owners of real properties, to construct and install renewable energy systems on their real properties and to transfer the ownership of those systems to the owners of the real properties after a certain period?
  2. If the answer to the first question is “yes”, should the subsidy received by the municipality (public authority) from EU funds to implement RES projects be included in the taxable base?


Case study

The need to file the request for a preliminary ruling arose from the following case.


A municipality received EU funds for the implementation of projects aimed at promoting the use of RES by subsidising the installation of renewable energy systems on real properties located in various municipalities. The interested entities could get part of the expenses covered by the municipality but they had to pay the remaining part from their own resources as their own contribution.


It was necessary to clarify in court whether the municipality would act as a VAT taxable person with respect to the installation of renewable energy systems.


The municipality argued that the services were not subject to VAT because they were performed under the public law regime and not as part of a business activity.


The Head of the National Tax Information Service disagreed with that. In its opinion, the municipality operates on the basis of civil law contracts that require payment and such activity is not exempt from tax under the VAT Act. Moreover, the authority pointed out that the EU funds reduced the amount that the real property owners would have to pay for the installation of renewable energy systems. Therefore, the EU funds must be included in the taxable base used for the service of installing a renewable energy system. This opinion was shared by the administrative court.


No consistent line of rulings on that issue has been developed in Poland so far.


Now, the case is pending before the CJEU. When referring the requests for a preliminary ruling to the CJEU, the Supreme Administrative Court addressed the issue of the municipality's status as a VAT taxable person, and in the event that such status should be assigned to it, the SAC also asked whether the granted subsidy affected the taxable base used for the service of installing a renewable energy system.


Hopefully, the CJEU will notice that shaping the energy mix in a positive way serves the public interest and is a responsibility of the state, including local governments, and not only the particular interest of prosumers. We appreciate the serious approach taken to this issue by the Supreme Administrative Court.


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Jakub Wajs

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

Senior Associate

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