VAT taxation of electricity resale to tenants
The topic of so-called media re-invoicing has raised many questions among lessors regarding the VAT rate indicated on the invoice. The problematic issue turned out to be the VAT rate for electricity, which is 5%, while for distribution services, it is 23%. Below, we present the current stance of the authorities and the relevant legal basis regulating this matter.
In the judgment of the Court of Justice of the European Union in the case C-42/14, it was indicated that the supply of energy is a separate transaction from the lease and should be taxed at the rate appropriate for energy, provided that the separation does not have an artificial character. In such a situation, the sale of energy constitutes a comprehensive service.
This means that from a legal standpoint, in the case of reselling electricity to tenants, the lessor is considered a service provider, and the lessee as a service recipient. It is worth recalling that currently, electricity is taxed at a VAT rate of 23%, and according to the VAT Act, all forms of energy are treated as goods. Therefore, if including it in the rental amount would be artificial, especially if the lessee has the possibility to contract separately for the supply of electricity (as emphasized by the CJEU), the rental rate cannot be applied.
According to the regulations, lessors wishing to invoice the costs of utilities do so in the same manner as the original provider of the utilities. However, the tax obligation on the lessor’s side arises at the time of issuing the invoice for the supply of electricity, rent, or similar services (Article 19a, paragraph 5, point 4 of the VAT Act). In case of delayed issuance or failure to issue the invoice, the tax obligation arises upon the expiry of the invoice issuance deadline or the payment deadline (Article 19a, paragraph 7 of the VAT Act).
VAT Rate for Photovoltaic Installation
Thanks to the amendment No. 5 to the Environmental Protection Act adopted by the Parliament on September 11th 2019, the VAT rate for photovoltaic panels has been standardized and currently stands at 8% for all taxpayers using photovoltaic panels for private purposes. It is worth noting that before the change in regulations, the interpretational line was divergent, and the tax rate depended on the installation location of the panels, often to the detriment of taxpayers.
For businesses and entities using photovoltaics for commercial purposes, the applicable VAT rate is 23%.
However, the supply of photovoltaic panels is subject to a 23% rate. In the case of supply with installation, according to the tax authorities’ position (WIS No. 0111-KDSB2-1.440.280.2021.8.AM), it is considered a comprehensive service subject to an 8% rate.
Charging Electric Vehicles
We’ve previously discussed charging electric vehicles here: https://www.nexiaadvicero.eu/ladowanie-samochodow-elektrycznych-jako-usluga/. However, it’s worth recalling the VAT taxation principles because this topic will become increasingly popular in the near future.
In the CJEU judgment C-282/22, a company intended to operate by installing and operating publicly accessible electric vehicle charging stations. The company’s services included:
- Providing charging devices for electric vehicles,
- Supplying electric energy with appropriately adjusted parameters for the vehicle’s batteries,
- Necessary technical support for users,
- Providing applications allowing users to reserve connectors, view transaction history, and make payments into a digital wallet for charging usage.
The company questioned the interpretation of the mentioned services as “service provision” according to Article 8 of the VAT Act. The Court of Justice ruled against the company. In its stance, the CJEU cited Article 14, paragraph of Directive 2006/112/EC, which regulates the concept of “supply of goods” as the transfer of the right to dispose of a thing as the owner. Furthermore, the supply of energy is the main service, therefore determining the relevant tax principles.
What does the CJEU judgment mean for taxpayers?
Charging electric vehicles is tax-wise recognized as the supply of goods, which also translates to:
- Place of supply – the location where the electric energy is at the time of sale,
- Incurrence of tax obligation – at the time of invoice issuance,
- Invoice issuance deadline – no later than the payment deadline,
- VAT rate – for the supply of goods, the rate is 23%.
If you have any questions or need support regarding VAT on electric energy or any other matter, we invite you to contact Advicero’s specialists.