(April 16, 2015)

On April 16, 2015 the European Court of Justice (CJEU) ruled in Case C‑42/14 Minister Finansów versus Wojskowa Agencja Mieszkaniowa w Warszawie (ECLI:EU:C:2015:229). 

·        Must Article 14(1), Article 15(1) and Article 24(1) of the VAT Directive be interpreted as meaning that there are supplies by the landlord of electricity, heat, water and refuse disposal services to the tenant of the premises directly using those goods and services, which are supplied to those premises by specialist third persons, in a situation where one of the parties to the agreements for the supply of those goods and services is the landlord, who simply passes on the costs thereof to the tenant who actually uses them?

·        If the answer to Question 1 is in the affirmative, do the costs of electricity, heat, water and refuse disposal used by the tenant of the premises increase, as regards the landlord, the taxable amount (rent), as referred to in Article 73 of the VAT Directive, resulting from the supply of the rental service, or do the supplies of goods and services in question constitute supplies separate from the rental service?’

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

·        The Wojskowa Agencja Mieszkaniowa is a public body responsible, inter alia, for letting State immovable property entrusted to it. In the context of this activity it resells supplies including, first, the provision of certain utilities, including electricity, heating and water, and, second, refuse disposal, by passing on to tenants the costs which it incurs in purchasing those goods and services from third-party suppliers. As regards utilities, the Wojskowa Agencja Mieszkaniowa charges tenants in advance in accordance with the rental agreement. It does so by applying the tax rate applicable to each utility, then, at the end of the year, it corrects the accounts to reflect a tenant’s actual consumption of electricity, heating and water.

·        As VAT rates increased from 1 January 2011, the Wojskowa Agencja Mieszkaniowa was uncertain as to the rates applicable to items on its invoices issued after that date, either for claiming outstanding balances from tenants or for correcting overpayments by them. The Wojskowa Agencja Mieszkaniowa sought an individual interpretation from the Minister Finansów, indicating which rates it thought were applicable.

·        In his individual interpretation of 21 June 2011, the Minister Finansów explained that the method of calculating the VAT envisaged by the Wojskowa Agencja Mieszkaniowa was incorrect and noted that the provision of utilities and refuse collection were part of a whole constituting a single supply, namely rental services. Therefore, it was appropriate to include those various services in the taxable amount of the service that constituted the main service and to apply a single tax rate, namely the rate applicable to that service. The Minister Finansów stated that that rate was 23% as from 1 January 2011 and 22% prior to that.

·        Since the tax authorities maintained the position set out in the individual interpretation, the Wojskowa Agencja Mieszkaniowa brought an action before the Wojewódzki Sąd Administracyjny w Warszawie (Administrative Court of the voïvodie of Warsaw), which annulled the interpretation of the Minister Finansów by judgment of 17 July 2012.

·        That court held that the charges arising from the provision of utilities and refuse collection had to be included in the taxable amount of the rental service, as part of the rent, except where it is clear from the rental agreement that all or some of those charges are not included in the rent and are paid separately by the tenant.

·        That court found that the Wojskowa Agencja Mieszkaniowa had not provided clear information in this regard and that the Minister Finansów ought to have sought clarification from it before adopting the individual interpretation.

·        The Wojewódzki Sąd Administracyjny w Warszawie pointed out that the fact that the tenant and the suppliers of the utilities and the refuse collection service have not concluded an agreement directly does not necessarily mean that the landlord supplies the tenant with a single rental service of a complex nature.

·        The Minister Finansów brought an appeal on a point of law before the Naczelny Sąd Administracyjny (Supreme Administrative Court).

·        That court notes that the case has important practical consequences since, as regards the supply of water, in particular, depending on whether it is billed separately or included in the rent, the applicable rate of VAT will be 8% or 23% respectively. However, it harbours doubts as to how to interpret the VAT Directive in the light of the Court’s case-law, and more specifically as to whether the landlord provides a single supply or several distinct supplies.

·        In those circumstances the Naczelny Sąd Administracyjny decided to stay the proceedings and to refer the following questions to the Court of Justice for a preliminary ruling:

(1)       Must Article 14(1), Article 15(1) and Article 24(1) of the VAT Directive be interpreted as meaning that there are supplies by the landlord of electricity, heat, water and refuse disposal services to the tenant of the premises directly using those goods and services, which are supplied to those premises by specialist third persons, in a situation where one of the parties to the agreements for the supply of those goods and services is the landlord, who simply passes on the costs thereof to the tenant who actually uses them?

(2)     If the answer to Question 1 is in the affirmative, do the costs of electricity, heat, water and refuse disposal used by the tenant of the premises increase, as regards the landlord, the taxable amount (rent), as referred to in Article 73 of the VAT Directive, resulting from the supply of the rental service, or do the supplies of goods and services in question constitute supplies separate from the rental service?

The CJEU ruled as follows:

1.     Articles 14(1), 15(1) and 24(1) of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax, as amended by Council Directive 2009/162/EU of 22 December 2009, must be interpreted as meaning that, in the context of the letting of immovable property, the provision of electricity, heating and water and refuse collection, provided by third-party suppliers for the tenant directly using those goods and services must be regarded as being supplied by the landlord where he has concluded agreements for the provision of those supplies and simply passes on the costs thereof to the tenant.

2.     That directive must be interpreted as meaning that the letting of immovable property and the provision of water, electricity and heating as well as refuse collection accompanying that letting must, in principle, be regarded as constituting several distinct and independent supplies which need to be assessed separately for VAT purposes, unless the elements of the transaction, including those indicating the economic reason for concluding the contract, are so closely linked that they form, objectively, a single, indivisible economic supply which it would be artificial to split.

It is for the national court to make the necessary assessments taking into account all the circumstances of the letting and the accompanying supplies and, in particular, the content of the agreement itself.

For further information click here to be forwarded to the text of the ruling as published on the website of the Court of Justice, which will open in a new window.

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