© 2025 by Michael Firth KC, Gray's Inn Tax Chambers
Contact: michael.firth@taxbar.com
Q1. Public bodies
GENERAL
- Interpret strictly, as an exception
"[49] As an exception to the general rule that any activity of an economic nature be subjected to VAT, Article 13(1) of Directive 2006/112 is to be interpreted strictly (see, inter alia, judgment in Isle of Wight Council and Others, C‑288/07, EU:C:2008:505, paragraph 60, and order in Gmina Wrocław, C‑72/13, EU:C:2014:197, paragraph 19)." (Saudacor C-174/14)
TWO CONDITIONS
- (1) Activities carried out by body governed by public; (2) Carried out by that body acting as a public authority
"[51] As the Court has consistently held, it is clear from Article 13(1) of Directive 2006/112, when examined in the light of the aims of the directive, that two conditions must both be fulfilled for the rule of treatment as a non-taxable person to apply: the activities must be carried out by a body governed by public law and they must be carried out by that body acting as a public authority (see to that effect, inter alia, order in Mihal, C‑456/07, EU:C:2008:293, paragraph 16 and the case-law cited, and judgment in Commission v Netherlands, C‑79/09, EU:C:2010:171, paragraph 79)." (Saudacor C-174/14)
(1) Body governed by public law
- Fact of carrying out activities falling within powers of public body not sufficient
"[56] As regards, specifically, the first of the two conditions laid down in Article 13(1) of that directive, namely the condition that the body be governed by public law, the Court has already held that a person which, not being part of the public administration, independently performs acts falling within the powers of the public authority cannot be classified as a body governed by public law within the meaning of that provision (see to that effect, inter alia, order in Mihal, C‑456/07, EU:C:2008:293, paragraph 18 and the case-law cited)." (Saudacor C-174/14)
- Mere fact of activity consisting in performance of acts falling within powers conferred by public law not sufficient
"[57] The Court has also made it clear that the status as a ‘body governed by public law’ cannot stem from the mere fact that the activity at issue consists in the performance of acts falling within powers conferred by public law (see to that effect, inter alia, order in Mihal, C‑456/07, EU:C:2008:293, paragraph 17 and the case-law cited)." (Saudacor C-174/14)
- Use of powers conferred by public law is factor of definite importance
"[58] Nevertheless, whilst the fact that the body in question has, under the applicable national law, powers conferred by public law is not decisive for the purposes of that classification, it does constitute, in so far as it is an essential characteristic specific to any public authority, a factor of definite importance in determining that the body must be classified as a body governed by public law." (Saudacor C-174/14)
(2) Acting as such
- Electricity supplier with public service obligation
"[50] Subject to the assessment to be made by the referring court, since the national court alone has jurisdiction to interpret the law of the Member State concerned, it should be borne in mind that Fluvius’s articles of association classify it as a legal person governed by public law with a sui generis status, as confirmed by the Belgian Government in its observations. Furthermore, as indicated in paragraph 19 of the present judgment, Fluvius, as an inter-municipal cooperation structure, is administered by the elected representatives of the municipalities participating in that cooperation and its tasks are those of those municipalities, carried out jointly. Thus, in the light of those documents before the Court, notwithstanding the designation ‘association charged with a mission’ (Opdrachthoudende vereniging), a body such as Fluvius appears to fall within the definition of a body governed by public law within the meaning of Article 13(1) of Directive 2006/112.
[51] Furthermore, Fluvius’s obligation referred to in paragraph 45 of the present judgment appears to correspond to a public service obligation, in so far as it seeks to prevent persons without a commercial contract with an energy supplier, for example for reasons of economic insecurity, from being deprived of an electricity supply." (Fluvius Antwerpen C-677/21)
EXCEPTIONS TO NON-TAXABLE PERSON TREATMENT
- Seek to avoid distortions of competition
"[53] By providing, in that provision, that the activities listed in Annex I to that directive, such as the distribution of electricity, are, in any event, unless they are carried out on such a small scale as to be negligible, to be subject to VAT, even if they are carried out by a body governed by public law acting as a public authority, the EU legislature sought to avoid certain distortions of competition (see, to that effect, judgment of 16 July 2009, Commission v Ireland, C‑554/07, EU:C:2009:464, paragraphs 72 and 73 and the case-law cited)." (Fluvius Antwerpen C-677/21)
NEGLIGIBLE
- Interpret strictly
"[54] It follows that the concept of ‘negligible activity’ constitutes a derogation from the general rule that any activity of an economic nature is subject to VAT. Therefore, that concept must be interpreted strictly (see, to that effect, judgment of 25 February 2021, Gmina Wrocław (Transformation of the right of usufruct), C‑604/19, EU:C:2021:132, paragraph 77 and the case-law cited)." (Fluvius Antwerpen C-677/21)
- Minimal scale in space or time such that economic impact likely to be insignificant
"[55] As a result, that activity is not subject to VAT only if it is possible to regard the activity referred to in Annex I to Directive 2006/112, carried out by a body governed by public law acting as a public authority, as being of such minimal scale in space or time and, consequently, of such a slight economic impact that the distortions of competition likely to result are liable to be, if not nil, at the very least insignificant." (Fluvius Antwerpen C-677/21)
- Making provision for payment for unlawful taking of electricity indicates such usage is not insignificant
"[56] In the light of the considerations set out in paragraphs 45 and 46 of the present judgment, it appears that that is not the case with the supply of electricity by a distribution network operator such as Fluvius, including in the context of an unlawful usage of electricity, since both the Flemish Region and Fluvius were led to make provision for the administrative and financial consequences of unlawful usages, which is indicative of their being significant. Consequently, a supply of electricity such as that at issue in the main proceedings does not form part of a negligible activity and must therefore be subject to VAT." (Fluvius Antwerpen C-677/21)