Summary
- Context and Purpose: The Belgian authorities have raised a question regarding the VAT treatment of Two-Way Contracts for Difference (TWCfD) used in a national support scheme to encourage investments in renewable energy, specifically for an offshore wind farm in the Belgian Exclusive Economic Zone of the North Sea.
- Mechanism Description: The TWCfD involves a direct grant where the Belgian State and the electricity generator agree on a strike price. If the market price is lower than the strike price, the State pays the difference to the generator; if higher, the generator pays the difference to the State. This mechanism aims to stabilize revenues and avoid excessive profits.
- VAT Implications: The document explores whether the concession of maritime areas and the bi-directional cash settlements under TWCfD constitute economic activities and supplies of services for consideration under VAT law. It questions if these transactions fall within the scope of VAT or are exempt as financial services.
- Commission’s Opinion: The Commission services express doubts about considering the hedging provided by the Belgian State as a supply of service for consideration due to the lack of a direct link between the hedging and bi-directional payments. They also question whether this hedging is an independent supply or ancillary to the concession.
- Request for Harmonization: Belgium seeks a uniform approach to the VAT treatment of TWCfDs across the EU, emphasizing the need for clarity and legal certainty given the potential widespread use of such contracts in supporting renewable energy investments.
Articles discussed of the VAT Directive 2006/112/EC
Articles 2, 9, 13 and 135(1)(a), (c) and (f)
Article 9
1. ‘Taxable person’ shall mean any person who, independently, carries out in any place any economic activity, whatever the purpose or results of that activity.
Any activity of producers, traders or persons supplying services, including mining and agricultural activities and activities of the professions, shall be regarded as ‘economic activity’. The exploitation of tangible or intangible property for the purposes of obtaining income therefrom on a continuing basis shall in particular be regarded as an economic activity.
2. In addition to the persons referred to in paragraph 1, any person who, on an occasional basis, supplies a new means of transport, which is dispatched or transported to the customer by the vendor or the customer, or on behalf of the vendor or the customer, to a destination outside the territory of a Member State but within the territory of the Community, shall be regarded as a taxable person.
Article 13
1. States, regional and local government authorities and other bodies governed by public law shall not be regarded as taxable persons in respect of the activities or transactions in which they engage as public authorities, even where they collect dues, fees, contributions or payments in connection with those activities or transactions.
However, when they engage in such activities or transactions, they shall be regarded as taxable persons in respect of those activities or transactions where their treatment as non-taxable persons would lead to significant distortions of competition.
In any event, bodies governed by public law shall be regarded as taxable persons in respect of the activities listed in Annex I, provided that those activities are not carried out on such a small scale as to be negligible.
2. Member States may regard activities, exempt under Articles 132, 135, 136 and 371, Articles 374 to 377, Article 378(2), Article 379(2) or Articles 380 to 390b, engaged in by bodies governed by public law as activities in which those bodies engage as public authorities.
Article 135
1. Member States shall exempt the following transactions:
(a) insurance and reinsurance transactions, including related services performed by insurance brokers and insurance agents;
(c) the negotiation of or any dealings in credit guarantees or any other security for money and the management of credit guarantees by the person who is granting (f) transactions, including negotiation but not management or safekeeping, in shares, interests in companies or associations, debentures and other securities, but excluding documents establishing title to goods, and the rights or securities referred to in Article 15(2);
Source WP 1097 – Belgian question on Two-Way Contracts for Difference
