4 November 2022 saw entry into force of the Act of 27 October 2022 on extraordinary measures intended to limit the prices of electricity and on support for certain customers in 2023. Among other things, the law regulates an equalisation scheme whereby certain entities are compensated for energy price caps.
In accordance with the VAT Act, grants, subsidies and other payments of a similar nature directly affecting the price of the goods are to be treated as part of taxable amount. In a private tax ruling issued on 29 June 2023 (ref. 0112-KDIL3.4012.269.2023.2.EW), the Polish tax authorities held that where a grant is individually and measurably related to the price of the supply (i.e. the price is lower by a specific amount thanks to the grant), it is subject to VAT.
According to the ruling authority, an equalization allowance (payment) awarded under the above-cited law to compensate for electricity price caps is such a grant because it is absolutely and directly related to supply of electricity to certain customers and is awarded on the basis of a certain reciprocity (reduced electricity price from the supplier). Consequently, the compensation payments in respect of electricity price caps used for certain customers:
- constitute remuneration from third party for supply of electricity to those customers,
- are part of the taxable amount in respect of supply of electricity, and as such
- are subject to VAT, meaning that the electricity seller must calculate VAT and pay it to the tax authorities.
Similar interpretations have been issued for analogous compensation schemes for gas and heat prices (e.g. rulings dates 7 June 2023, ref. 0111-KDIB3-3.4012.622.2022.1.MAZ, and 21 June 2023, ref. 0114-KDIP1-1.4012.299.2023.1.MŻ).
Authorised sellers of electricity, gas or heat who are eligible for the subject compensation should verify their VAT compliance in terms of the taxation of such support.
If this issue pertains to your business and you are interested in our assistance, please contact us.
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