Flashback on ECJ Cases C-42/14 (Wojskowa Agencja Mieszkaniowa) – Letting of immovable property and the provision of water, electricity and heating must be regarded as constituting several distinct and independent supplies

On April 16, 2015, the ECJ issued its decision in the case C-42/14 (Wojskowa Agencja Mieszkaniowa). This case dealt whether the letting of immovable property and the supply of ancillary goods/services to the tenant can be considered as a single supply of a separate independent supply.

Context: Reference for a preliminary ruling — Taxation — Common system of value added tax — Letting of immovable property — Supply of electricity, heating, water and refuge collection — Agreements between the landlord and the suppliers of those goods and services — Supplies provided to the tenant considered to be provided by the landlord — Service charges — Determination of the taxable amount — Possibility of including service charges in the taxable amount of rental services — Transaction composed of a single supply or several independent supplies

Article in the EU VAT Directive

Article 14(1), 15(1), 24(1), 73 of Council Directive 2006/112/EC

Article 14 (Taxable transaction – Supply of goods)
1. “Supply of goods” shall mean the transfer of the right to dispose of tangible property as owner.

Article 15 (Taxable transaction – Supply of goods)
1. Electricity, gas, heat or cooling energy and the like shall be treated as tangible property.

Article 24 (Taxable transaction – Supply of services)
1. “Supply of services” shall mean any transaction which does not constitute a supply of goods.

Article 73 (Taxable amount)
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.

Facts

The applicant (Warsaw military housing agency) is a government agency. He manages the state properties entrusted to him, in particular immovable property, and makes them available to tenants.
He submits questions to MinFIN in connection with the VAT rates on the passing on of services provided by third parties such as energy, waste disposal and the like, which accompany the rental. This concerns accruals (here the years 2010-2011) when invoices received at the office in the new year relate to and the VAT rate of the previous year must be taken into account. The Applicant is of the opinion that if settlement takes place after December 31, 2010, the rate applicable at the time of resale (settlement) applies according to the POL VAT Act.
MinFIN disagrees. He is of the opinion that for the application of the correct VAT rate a split between main and ancillary services is essential. The rental is the main service, the other matters are agreements for additional services. The costs for these deliveries cannot be passed on directly to the tenant because the tenant is not a party to these agreements, but only the landlord. The rental, together with the aforementioned additional services, therefore forms a single service and a single VAT rate must be applied to it, namely the rate applicable to the main service.
The referring POL court (administrative court in the province of Warsaw) has doubts as to whether this concerns supplies within the meaning of the EU VAT Directive 2006/112. After all, the services provided by the lessor also include services that are not regulated separately in the EU VAT Directive 2006/112. He therefore wonders whether services of a general nature related to the rental can be regarded as supplies and services within the meaning of the EU VAT Directive 2006/112.

Questions

(1) Must Article 14(1), Article 15(1) and Article 24(1) of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax ¹ 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 Directive 2006/112/EC, 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?

AG Opinion

None

Decision

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.

Summary

In the context of the letting of immovable property, the provision of electricity, heating and water and refuse collection, provided by third-party suppliers to the tenant directly using those goods and services must be regarded as being supplied by the landlord where he has reached agreements for the provision of those supplies and simply passes on the costs thereof to the tenant. The provision of water, electricity and heating as well as the refuse collection accompanying the letting of immovable property must, in principle, be considered 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 would be artificial to split. It is the national court that has to make the necessary assessments taking in to account all the circumstances of the letting and the accompanying supplies and, in particular, the content of the agreement itself.

Source