ECJ on services for the supply of utilities

C-42/14: Tax base in cases of recharge of various service charges concurrently with rents

ECJ has ruled that recharge of services for the supply of utilities, which the landlord recharges to the tenant, should be treated as distinct from the lease of the immovable property unless they are so closely linked to the lease of immovable property that they objectively form a single, indivisible supply.

On 16 April 2015, Court of Justice of the European Union ('ECJ') ruled in the case of Wojskowa Agencja Mieszkaniowa w Warszawie. Subject matter of the dispute was the application of the VAT rate used by Wojskowa Agencja Mieszkaniowa in the sale of goods and provision of services when renting immovable property.

Wojskowa Agencja Mieszkaniowa is a public body, entrusted with the services of renting state-owned immovable property. In the context of this activity it resells supplies including electricity, heating and water as well as waste disposal, by passing on to its tenants the costs incurred in purchasing these goods and services from third-party suppliers. In accordance with the rental agreements, Wojskowa Agencja Mieszkaniowa charged the tenants in advance by applying the VAT rate applicable to each utility and then, at the end of the year, corrected the accounts to reflect a tenant's actual consumption of individual utilities.

Minister of finance in Poland was of opinion that the method of calculating the VAT applied by Wojskowa Agencja Mieszkaniowa was incorrect and claimed that the provision of utilities and waste disposal do not constitute individual supplies but rather constitute a single supply, namely provision of rental services. It is therefore appropriate to include those various services in the taxable amount of service that constituted the principal service and to apply a single VAT rate applicable to that principal service. Wojskowa Agencja Mieszkaniowa appealed to the Supreme Administrative Court in Warsaw, which decided to refer two questions to the ECJ for a preliminary ruling.

The questions referred:

  • should in terms of rental of immovable property it be deemed that the supply of electricity, heating and water as well as waste disposal is made by the landlord, provided that the landlord has concluded agreements with the third-party suppliers of these utilities and simply passes on the costs of these utilities to the tenant;
  • do the costs of utilities, effectively used by the tenant, increase the taxable amount of rent as regards the landlord, or do the supplies of goods and services in question constitute supplies separate from the principal (rental) service.


The existence of individual meters and billing according to the amount of the goods used is a factor of importance which suggests that the provision of utilities should be regarded as constituting separate supplies from the lease of immovable property. If, in addition, the amount due for waste disposal and the amount due for lease of immovable property are itemized separately on the invoice, it must be considered that the landlord does not provide a single supply consisting of the lease of immovable property and that supply. Furthermore, another factor which may be used to determine whether the supplies should be regarded as separate and independent is if the tenants have a choice of suppliers (i.e. may choose which third-party suppliers will render supplies of goods and services independently).
ECJ ruled that in the context of renting immovable property, the provision of electricity, heating and water as well as waste disposal, provided by third-party suppliers for the tenant directly using those goods and services, shall be regarded as being supplied by the landlord if he has concluded agreements for the provision of those supplies with the third-party suppliers and he simply passes on the costs thereof to the tenant, while the tenants do not have the option to freely and independently choose the third-party suppliers and do not conclude contractual agreements with them.
Furthermore, the VAT Directive shall be interpreted as meaning that the letting of immovable property and the provision of water, electricity and heating as well as waste disposal 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.

Finally, the national courts shall make the necessary assessments, taking into account all the circumstances of the leasing the immovable property and the accompanying supplies as well as, in particular, the content of the agreement itself.

Rulings of the Court of Justice of the European Union

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