The VAT taxable base of public interest subsidies linked to the sale price

If the subsidy constitutes part of the remuneration for a service provided by the taxable person to the granting authority or its clients, then the taxable person is required to pay VAT on the subsidy. Conversely, if the subsidy does not represent part of the remuneration for a service (in favor of the granting authority or its clients), but rather a general subsidy awarded to the taxable person, then there is no taxable transaction and VAT is not due.

This distinction between the two cases is often difficult to determine, as shown by the numerous rulings on the subject by the EU Court of Justice (see, among others, Cases C‑21/20, C‑573/18, C‑144/02, C‑184/00, C‑353/00, C‑384/95, C‑215/94, 102/86).

In one of the most recent cases (C-615/23), for example, the Court was asked to rule on a subsidy granted to a public collective transport company that received compensation to cover losses resulting from the provision of transport services, where the payment was not calculated based on the number of users but rather on a flat-rate basis, according to the vehicle-kilometers offered.

After examining and explaining the criteria to distinguish between a subsidy for a specific service and a general subsidy independent of any service, the EU Court concluded that a retroactive compensation for financial losses, determined not by the number of users but on a flat-rate ...