VAT relevance of subsidy and consideration

By its nature, VAT is a general consumption tax aimed at taxing the expenditure (usually a payment in money) incurred by the recipient of a supply of goods or services (Lebara, C‑520/10), which the supplier receives from the recipient. Under Article 73 of the VAT Directive, this amount is extended to expenditure incurred by a third party, with the consequence that it also includes the consideration that the supplier receives from a third party ‘for such transactions’. However, in both cases, it must be consideration relating to a transaction carried out by the person receiving the payment in money, in this case the company.

As for the definition of a taxable transaction, this is contained in Article 2(1)(a) and (c) of the VAT Directive, according to which the following transactions are subject to VAT: supplies of goods and services, carried out within a Member State by a taxable person acting as such. In particular, it is clear from the definition of supply in Article 14 of the VAT Directive (‘transfer of power’) that (in the case of the supply of goods) the supplier must confer a tangible and consumable benefit on the recipient. It is therefore a question of taxing a transfer of consumer goods for consideration between two persons.

As a tax on consumption, VAT is intended to tax the consumer’s capacity, wh...