ECJ’s Judgment of September 29th, 2015, Gmina Wroclaw. VAT taxable person status of entities integrated in a municipal body’s budget


Through the case referred to the EU Court enter into the fray again the terms established by a thin line to consider a public body as taxable person for VAT or not.

In this case it refers to the interpretation of the word “independently” established in the Directive 2006/112/EC to determine whether the entities integrated in a municipality and within its municipal budget (schools, cultural centers, services entities of police, among others) do have the status of taxable person when carrying out economic activities, or it is the municipal body itself who must acquire the status of taxable person for VAT. At first, the Minister prepared a report (upon request of the municipality) where he considered these entities who perform an economic activity as independent and, therefore, should be regarded as taxable persons. However, when appealing against that interpretation, the national body referred the matter to the ECJ for it to rule on the interpretation of the word “independently” set out in Article 9 of the VAT Directive for considering a taxable person.

In short, through the question referred is asked to the Court whether Article 9(1) of the VAT Directive must be interpreted as meaning that bodies governed by public law, such as the municipal budgetary entities at issue in the main proceedings, may be regarded as taxable persons for the purposes of VAT when they do not satisfy the criterion of independence set out in that provision. That is, do they exercise their economic activities with independent character of the municipal body? It is therefore necessary to determine, as the case law of this Court, if these entities are in a position of subordination with the municipality.

To clarify this concept of subordination the Court refers to aspects such as whether the person is acting in his name, on his own and under his responsibility and whether bears the economic risk of the activity. So, in this case, the entities integrated in the municipal budget conduct economic activities in behalf of the municipality, without responding to the damage caused by such activities but the sole responsibility lies in the municipality. Also relevant is the fact that the entities do not have title of their own assets, do not generate their own income or support activity costs, but both revenues and expenses are included in the municipal budget.

In conclusion, in view of the facts, the Court considers that both the municipality and its integrated entities should be considered as a single taxable person, as the latter are in a subordinate position with respect to the municipality.

A copy of the judgment of case C-276/14 is attached.

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