C-677/21 Fluvius Antwerpen

JUDGMENT OF THE COURT (Seventh Chamber)

27 April 2023 ( *1 )

(Reference for a preliminary ruling – Taxation – Value added tax (VAT) – Directive 2006/112/EC – Taxable transactions – Article 2(1)(a) – Concept of ‘supply of goods for consideration’ – Article 9(1) – Economic activity – Article 14(1) and (2)(a) – Supply of goods – Unlawful consumption of electricity – Principle of neutrality of VAT – Charging the consumer for compensation including the price of the electricity consumed – Regional legislation of a Member State – Taxable person – Sui generis entity mandated by municipalities – Concept of ‘body governed by public law’ – Directive 2006/112/EC – Article 13(1), third subparagraph, and Annex I – Principle of taxability of electricity distribution – Concept of ‘negligible activity’)

In Case C‑677/21,

REQUEST for a preliminary ruling under Article 267 TFEU from the vredegerecht te Antwerpen (Magistrates’ Court, Antwerp, Belgium), made by decision of 8 November 2021, received at the Court on 11 November 2021, in the proceedings

Fluvius Antwerpen,

v

MX,

THE COURT (Seventh Chamber),

composed of M.L. Arastey Sahún, President of the Chamber, N. Wahl (Rapporteur) and J. Passer, Judges,

Advocate General: J. Kokott,

Registrar: A. Calot Escobar,

having regard to the written procedure,

after considering the observations submitted on behalf of:

Fluvius Antwerpen, by C. Docclo, avocate, and T. Chellingsworth, D. Devroe and B. Gevers, advocaten,

the Belgian Government, by P. Cottin, J.-C. Halleux and C. Pochet, acting as Agents,

the European Commission, by J. Jokubauskaitė and W. Roels, acting as Agents,

after hearing the Opinion of the Advocate General at the sitting on 12 January 2023,

gives the following

Judgment

Legal context and the dispute

1This request for a preliminary ruling concerns the interpretation of Article 2(1)(a) of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax (OJ 2006 L 347, p. 1), as amended by Council Directive 2009/162/EU of 22 December 2009 (OJ 2010 L 10, p. 14) (‘Directive 2006/112’), read in conjunction with Article 14(1) and (2) of that directive, and also Article 9(1) and Article 13(1) of that directive.

2The request has been made in proceedings between Fluvius Antwerpen (‘Fluvius’), an electricity distribution network operator, and MX, an electricity consumer, concerning the payment of an invoice relating to an unlawful usage of electricity.

Legal context

European Union law

3Article 2 of Directive 2006/112 provides:

‘1. The following transactions shall be subject to [value added tax (VAT)]:

the supply of goods for consideration within the territory of a Member State by a taxable person acting as such;

…’

4Article 9(1) of that directive provides:

‘“Taxable person” shall mean any person who, independently, carries out in any place any economic activity, whatever the purpose or results of that activity.

Any activity of producers, traders or persons supplying services, including mining and agricultural activities and activities of the professions, shall be regarded as “economic activity”. The exploitation of tangible or intangible property for the purposes of obtaining income therefrom on a continuing basis shall in particular be regarded as an economic activity.’

5Article 13(1) of that directive provides:

‘States, regional and local government authorities and other bodies governed by public law shall not be regarded as taxable persons in respect of the activities or transactions in which they engage as public authorities, even where they collect dues, fees, contributions or payments in connection with those activities or transactions.

…

In any event, bodies governed by public law shall be regarded as taxable persons in respect of the activities listed in Annex I, provided that those activities are not carried out on such a small scale as to be negligible.’

6Article 14 of that directive is worded as follows:

‘1. “Supply of goods” shall mean the transfer of the right to dispose of tangible property as owner.

2. In addition to the transaction referred to in paragraph 1, each of the following shall be regarded as a supply of goods:

the transfer, by order made by or in the name of a public authority or in pursuance of the law, of the ownership of property against payment of compensation;

…’

7Article 15(1) of Directive 2006/112 provides:

‘Electricity, gas, heat, refrigeration and the like shall be treated as tangible property.’

8Annex I to that directive, entitled ‘List of the activities referred to in the third subparagraph of Article 13(1)’, includes a point 2 concerning ‘supply of water, gas, electricity and thermal energy’.

Belgian law

The VAT Code

9The first and third paragraphs of Article 6 of the wet tot invoering van de belasting over de toegevoegde waarde (Law establishing the Value Added Tax Code) of 3 July 1969 (Belgisch Staatsblad, 17 July 1969, p. 7046), in the version applicable to the facts of the case in the main proceedings (‘the VAT Code’), provide:

‘The State, the Communities and the regions of the Belgian State, the provinces, agglomerations, municipalities and public establishments shall not be considered taxable persons in respect of the activities or transactions in which they engage as public authorities, even where they collect dues, fees, contributions or payments in connection with those activities or transactions.

…

They shall in any event have the status of taxable person for the purposes of [VAT] in respect of the following activities or transactions, in so far as those activities or transactions are not carried out on such a small scale as to be negligible:

…

supply of water, gas, electricity and thermal energy;

…’

10The first and second paragraphs of Article 9 of the VAT Code are worded as follows:

‘For the purposes of the application of the [VAT Code], goods shall be understood to be tangible property.

The following shall be regarded as tangible property:

(1) electricity, gas, heat and cooling;

…’

11Article 10(1) and (2) of the VAT Code is worded as follows:

‘1. “Supply of goods” shall mean the transfer of the right to dispose of tangible property as owner.

In particular, this involves making goods available to a person acquiring them under a contract transferring property or declaring rights to property.

2. The following shall also be regarded as a supply of goods:

transfer, by order made by or in the name of a public authority, of the ownership of property against payment of compensation and, more generally, in pursuance of a law, decree, ordinance, decision or administrative regulation;

…’

The Energy Decree

12The decreet houdende algemene bepalingen betreffende het energiebeleid (Decree laying down general provisions on energy policy) of 8 May 2009 (Belgisch Staatsblad, 7 July 2009, p. 46192), as amended by the decreet tot wijziging van het Energiedecreet van 8 mei 2009, wat betreft het voorkomen, detecteren, vaststellen en bestraffen van energiefraude (Decree amending the Decree on energy of 8 May 2009, as regards the prevention, detection, establishment and punishment of energy fraud) of 24 February 2017 (Belgisch Staatsblad, 22 March 2017, p. 38694) (‘the Energy Decree’), adopted by the Flemish Government, includes Article 1.1.3, which provides:

‘…

(40)(1) Energy fraud: means any unlawful act by a person, whether active or passive, which involves obtaining an undue advantage. The following shall be regarded as energy fraud:

unauthorised performance of operations on the distribution network or on the local electricity transmission network;

manipulation of the connection or the metering device;

failure to comply with the reporting obligations arising from the application of this Decree, its implementing decisions, the connection regulation, the connection contract or the technical regulation;

…’

13Under Article 4.1.1 of the Energy Decree, the Vlaamse Regulator van de Elektriciteits- en Gasmarkt (Flemish Electricity and Gas Regulator; ‘the VREG’), which is an independent external agency governed by public law, designates, for a geographically defined area, a legal person responsible for the operation of the electricity or natural gas distribution network in that area.

14Article 5.1.2 of the Energy Decree provides:

‘…

The relevant network user shall bear the costs incurred by the network operator to undo the energy fraud as defined in Article 1.1.3(40)(1)(a), (b), (c), (d) and (g), the costs of disconnection, the regularisation of the connection or of the metering device, the reconnection, the costs of the unlawfully obtained advantage and interest.

…’

The Energy Decision

15The besluit van de Vlaamse Regering houdende algemene bepalingen over het energiebeleid (Decision of the Flemish Government laying down general provisions on energy policy) of 19 November 2010 (Belgisch Staatsblad, 8 December 2010, p. 74551), as amended by the besluit van de Vlaamse Regering tot wijziging van het Energiebesluit van 19 november 2010, wat betreft het voorkomen, detecteren, vaststellen en bestraffen van energiefraud (Decision of the Flemish Government amending the Energy Decision of 19 November 2010, as regards the prevention, detection, establishment and punishment of energy fraud) of 26 January 2018 (Belgisch Staatsblad, 30 March 2018, p. 31178) (‘the Energy Decision’), includes Article 4.1.2, which is worded as follows:

‘1. The unlawfully obtained advantage referred to in Articles 5.1.2 and 5.1.3 of the [Energy Decree] shall be calculated, as appropriate, as the product of one or more of the following:

a lump-sum price;

an estimated volume of consumption, injection or production;

the duration of the energy fraud.

The calculation referred to in subparagraph 1 shall always be indexed on the basis of the consumer price index. To that end, the unlawfully obtained advantage shall be multiplied by the ratio of the consumer price index on 1 January of the year in which the energy fraud was established and the consumer price index on 1 January of the year in which the energy fraud took place.

The unlawfully obtained advantage may relate to one or more of the following:

the costs avoided in the event of misuse of the distribution network or the local electricity transmission network;

the avoided costs of using the distribution network or the local electricity transmission network;

the avoided costs of connection to the distribution network or modification of the connection;

the avoided costs for the energy supplied;

…

2. In the cases referred to in points (1), (2) and (3) of subparagraph (3) of paragraph 1, the calculation shall be based on tariffs for connection to, or use of, the distribution network or the local electricity transmission network, determined in accordance with the applicable tariff method, including taxes, levies and VAT.

The calculation referred to in subparagraph 1 shall be based on the total duration of the energy fraud, the starting point being determined by objective elements established by the network operator.

3. In the case referred to in subparagraphs (3) and (4) of paragraph 1, the amount of energy supplied shall be estimated according to the estimation method provided for in the technical regulations.

…

The price used to calculate the electricity or natural gas consumed unlawfully shall be the price of electricity or natural gas in the event of fraud, as approved by the competent regulator and determined in accordance with Article 20(1) of the Law of 29 April 1999 on the organisation of the electricity market or in accordance with Article 15(10)(1) of the Law of 12 April 1965 on the transmission of gas and other products by pipeline, including taxes, levies and VAT.

…’

The dispute in the main proceedings and the questions referred for a preliminary ruling

16In the Flemish Region (Belgium), the supply of energy to individuals is governed by the Energy Decree, which is itself supplemented and implemented by the Energy Decision.

17Acting pursuant to Article 4.1.1 of the Energy Decree, the VREG designated Fluvius as the legal person responsible for the operation of the electricity or natural gas distribution network in the territory of a group of municipalities in that region.

18Fluvius is an inter-municipal cooperation structure established in the form of an association, of which 38 Flemish municipalities are members. It is defined in Article 2 of its articles of association as a legal person governed by public law with a sui generis status.

19Fluvius is entrusted by some of its member municipalities with the implementation of one or more of their responsibilities falling within one or more areas of activity, in this case energy distribution. Its board of directors is to be composed of councillors and aldermen of its member municipalities. As distribution network operator, it is, inter alia, responsible for transporting electricity to individual installations and is responsible for the installation, commissioning and reading of meters.

20During the period from 7 May 2017 to 7 August 2019, MX, an individual, consumed electricity illegally.

21Having established that unlawful consumption, Fluvius, on the basis of a comparison of the meter readings from the place of consumption at the beginning and end of that period, issued an invoice in the amount of EUR 813.41, including VAT of EUR 131.45, together with default interest and statutory interest. MX did not pay that invoice.

22Accordingly, on 22 June 2021, Fluvius brought proceedings against MX for payment of that invoice before the vredegerecht te Antwerpen (Magistrates’ Court, Antwerp, Belgium), the referring court. That court ordered MX, by the order for reference, to compensate Fluvius for the cost of ‘unlawfully taken energy’. It expresses doubts, however, as to whether VAT is chargeable in circumstances such as those of the case before it.

23In that regard, it observes that, before 1 May 2018, no legislative provision dealt explicitly with the question whether VAT could be charged on the compensation payable by the person who unlawfully used energy. Since that date, the combined provisions of Article 1.1.3(40)(1) and Article 5.1.2 of the Energy Decree and Article 4.1.2 of the Energy Decision have corrected that lacuna, since the usage of electricity on the network without the conclusion of a commercial contract and without notification to the distribution network operator may be regarded as an unlawful act, whether active or passive, associated with obtaining an unlawful advantage within the meaning of Article 1.1.3(40)(1) of the Energy Decree. In addition, Article 4.1.2(3) of the Energy Decision lays down the detailed rules governing how the compensation representing the unlawfully obtained advantage is to be determined and providing that that compensation is to include taxes, levies and VAT.

24The referring court is uncertain, however, whether those provisions are compatible with a number of articles of Directive 2006/112.

25In those circumstances, the vredegerecht te Antwerpen (Magistrates’ Court, Antwerp) decided to stay the proceedings and to refer the following questions to the Court of Justice for a preliminary ruling:

Must Article 2(1)(a), read in conjunction with Article 14(1) of [Directive 2006/112], be interpreted as meaning that the unlawful usage of energy is a supply of goods, being the transfer of the right to dispose of tangible property as owner?

If not, must Article 14(2)(a) of [Directive 2006/112] be interpreted as meaning that the unlawful usage of energy is a supply of goods, being a transfer, by order made by or in the name of a public authority or in pursuance of the law, of the ownership of property against payment of compensation?

Must Article 9(1) of [Directive 2006/112] be interpreted as meaning that, if [Fluvius] is entitled to compensation for unlawfully [taken] energy, it is to be regarded as a taxable person since the unlawful usage is the result of an “economic activity” of [Fluvius], namely the exploitation of tangible property for the purposes of obtaining income therefrom on a continuing basis?

If Article 9(1) of [Directive 2006/112] must be interpreted as meaning that the unlawful usage of energy constitutes an economic activity, must the first paragraph of Article 13(1) of [Directive 2006/112] then be interpreted as meaning that [Fluvius] is a public authority and, if so, must the third paragraph of Article 13(1) then be interpreted as meaning that the unlawful usage of energy is the result of an activity of [Fluvius] that is not carried out on such a small scale as to be negligible?’

Consideration of the questions referred

The first and second questions referred

26By its first and second questions, which it is appropriate to examine together, the referring court asks, in essence, whether Article 2(1)(a) of Directive 2006/112, read in conjunction with Article 14(1) or Article 14(2)(a) of that directive, must be interpreted as meaning that the supply of electricity by a distribution network operator, even if involuntary and as a result of unlawful conduct on the part of a third party, constitutes a supply of goods within the meaning of either of those two provisions.

27As a preliminary point, it should be borne in mind that Article 2(1)(a) of Directive 2006/112, relating to taxable transactions, provides that, inter alia, the supply of goods for consideration within the territory of a Member State by a taxable person acting as such is to be subject to VAT.

28As regards the activity at issue in the main proceedings, namely the supply of electricity, even if it is involuntary and the result of the illegal action taken by a third party, it should be noted at the outset, first, that, according to settled case-law, as regards the levying of VAT, the principle of fiscal neutrality precludes any general distinction between lawful and unlawful transactions (judgment of 10 November 2011, The Rank Group, C‑259/10 and C‑260/10, EU:C:2011:719, paragraph 45 and the case-law cited), since the VAT system is aimed at taxing the end consumer of goods or services (judgment of 1 July 2021, Tribunal Económico Administrativo Regional de Galicia, C‑521/19, EU:C:2021:527, paragraph 31 and the case-law cited) where those goods or services were supplied as part of taxable transactions pursuant to Directive 2006/112.

29Second, bearing in mind that Article 15(1) of that directive treats electricity as tangible property, it must be stated that the supply of such goods within the meaning of Article 2(1)(a) of that directive must be effected ‘for consideration’, which implies that there is a direct link between the supply of goods and the consideration actually received by the taxable person. Such a direct link is established where there is a legal relationship between the provider of the goods and the recipient thereof pursuant to which there is reciprocal performance, the remuneration received by the party initiating that transaction constituting the actual consideration for the goods supplied to the recipient (see, to that effect, judgment of 15 April 2021, Administration de l'Enregistrement, des Domaines et de la TVA, C‑846/19, EU:C:2021:277, paragraph 36).

30In the present case, the direct link between the unlawfully consumed electricity and the sum claimed in return by Fluvius is clear from the information provided by the referring court, since MX used the electricity at his residential address and Fluvius was able to establish the quantity thus used by drawing up a statement of the electricity consumption between 7 May 2017 and 7 August 2019 by reading the meter at that address. The amount corresponding to the cost of the electricity unlawfully consumed was thus included in the sum claimed from MX.

31Furthermore, the criterion relating to the existence of a legal relationship in the context of which the supply of goods takes place and the consideration for it must be interpreted in the light of the case-law referred to in paragraph 28 of the present judgment, taking into account all of the circumstances of each individual case in such a way that the principle of fiscal neutrality is not disregarded. In that context, that criterion must be given a broad meaning.

32Moreover, first, as pointed out by Fluvius, even if the supply of electricity has occurred without the conclusion of a contract, the relationship between the clandestine consumer and the electricity distribution network operator is governed by the connection regulation applicable to the facts in the main proceedings, which defines the concept of ‘unlawful usage’ and provides for the resulting consumption to be attributed by the distribution network operator to the person who engaged in that usage. Second, as stated in paragraph 23 of the present judgment, both the Energy Decree and the Energy Decision govern cases of usage of electricity without the conclusion of a commercial contract and without prior notification to the distribution network operator, and determine the detailed rules for determining the compensation representing the advantage unlawfully obtained by that consumer.

33Thus, a supply of goods with such characteristics, which it is for the referring court to verify, equates to a supply of goods for consideration within the meaning of Article 2(1)(a) of Directive 2006/112.

34It remains to be determined whether such a supply of goods may be defined as the transfer of the right to dispose of tangible property within the meaning of Article 14(1) of that directive or whether it constitutes a transfer, by order made by or in the name of a public authority or in pursuance of the law, of the ownership of property against payment of compensation, in accordance with Article 14(2)(a) of that directive.

35In that regard, it should be recalled that Article 14(1) of Directive 2006/112 does not refer to the transfer of ownership in accordance with the procedures prescribed by the applicable national law, but covers any transfer of tangible property by one party which empowers the other party actually to dispose of it as if he or she were its owner (judgment of 25 February 2021, Gmina Wrocław (Transformation of the right of usufruct), C‑604/19, EU:C:2021:132, paragraph 52 and the case-law cited).

36That concept is objective in nature and applies without regard to the purpose or results of the transactions concerned (judgment of 15 May 2019, Vega International Car Transport and Logistic, C‑235/18, EU:C:2019:412, paragraph 28).

37In the present case, it is apparent from the order for reference that, during the period from 7 May 2017 to 7 August 2019, that is to say, for over two years, Fluvius supplied MX with electricity. It therefore necessarily assumed that it was supplying a customer and, at the same time, MX behaved as such towards Fluvius and acted ‘as if he were its owner’, that is to say, he used the electricity supplied by Fluvius. As correctly pointed out by the Belgian Government, the properties of electricity mean that the usage from the distribution network coincides with consumption of the goods and that that consumption of the goods equates not only to usage of those goods but also to disposal thereof, which is the ultimate attribute of the right to property. A supply of goods in circumstances such as those in the main proceedings must therefore be regarded as the transfer of the right to dispose of tangible property within the meaning of Article 14(1) of Directive 2006/112.

38Since it is apparent from the wording and scheme of Article 14 of that directive that paragraph 2 of that article constitutes, in relation to the general definition set out in paragraph 1 thereof, a lex specialis, the conditions for the application of which are independent of those of paragraph 1 (judgment of 25 February 2021, Gmina Wrocław (Transformation of the right of usufruct), C‑604/19, EU:C:2021:132, paragraph 55 and the case-law cited), the finding in the preceding paragraph of the present judgment precludes the application of Article 14(2)(a) of that directive to the case in the main proceedings.

39In the light of the foregoing, the answer to the first and second questions referred is that Article 2(1)(a) of Directive 2006/112, read in conjunction with Article 14(1) of that directive, must be interpreted as meaning that the supply of electricity by a distribution network operator, even if involuntary and the result of unlawful conduct on the part of a third party, constitutes a supply of goods for consideration entailing the transfer of the right to dispose of tangible property.

The third and fourth questions referred

40By its third and fourth questions, which it is appropriate to consider together, the referring court asks, in essence, whether Article 9(1) of Directive 2006/112 must be interpreted as meaning that the supply of electricity by a distribution network operator, even if involuntary and the result of unlawful conduct on the part of a third party, constitutes an economic activity and, if so, whether, first, an operator engaging in such an activity, like Fluvius, thus acts as a public authority within the meaning of Article 13(1) of that directive and, second, if so, whether that provision must be interpreted as meaning that such usage relates to activity on the part of that operator that is not carried out on such a small scale as to be negligible.

41It should be noted that the analysis of the wording of Article 9(1) of Directive 2006/112, results in, first, the scope of the concept of ‘economic activity’ being highlighted, and, second, the objective nature of that concept being clarified, in the sense that the activity is considered per se and without regard to its purpose or results (see, to that effect, judgment of 25 February 2021, Gmina Wrocław (Transformation of the right of usufruct), C‑604/19, EU:C:2021:132, paragraph 69 and the case-law cited).

42An activity is thus, in general, classified as economic where it is permanent and is carried out in return for remuneration which is received by the person carrying out the transaction (judgment of 15 April 2021, Administration de l’Enregistrement, des Domaines et de la TVA, C‑846/19, EU:C:2021:277, paragraph 47 and the case-law cited).

43In the present case, the referring court does not ask the Court about the classification of the activity of an operator such as Fluvius who acts in its capacity as a distribution network operator, which activity clearly meets the criteria set out in the preceding paragraph of the present judgment. This point is confirmed, moreover, by the very wording of the third subparagraph of Article 13(1) of Directive 2006/112, read in conjunction with Annex I to that directive, which provides that the distribution of electricity is, in principle, subject to VAT even where it is carried out by a body governed by public law acting as a public authority. In highlighting the criterion of the operator’s intention to obtain income on a continuing basis, the referring court draws the Court’s attention to how MX’s unlawful usage of electricity in the present case was, first, unwanted by the operator and, second, an isolated case.

44As is clear from the Court’s case-law, in order to determine whether a given transaction falls within the scope of an economic activity, it is necessary to analyse all the circumstances in which it is carried out (see, to that effect, judgment of 15 April 2021, Administration de l’Enregistrement, des Domaines et de la TVA, C‑846/19, EU:C:2021:277, paragraph 48 and the case-law cited).

45In that regard, it is apparent from the file in the Court’s possession, first, that Fluvius is required, within the jurisdiction of the municipalities participating in the inter-municipal cooperation structure which it constitutes, to supply any person who no longer has a contract with a commercial distributor and who has given prior notice thereof to a body such as Fluvius. Consequently, it appears that, in so far as it proves necessary, Fluvius may be led to assume directly the role of electricity supplier, with the result that such an activity is not marginal and, moreover, far from being unconnected with its activity as an electricity distribution network operator, cannot be severed from its tasks considered as a whole.

46Second, both the Flemish Region, through Article 1.1.3(40)(1) and Article 5.1.2 of the Energy Decree, and through Article 4.1.2 of the Energy Decision, and Fluvius itself, through the connection regulation applicable to the facts in question, have made provision for cases of unlawful usage of energy, in particular electricity, and regulated the resulting administrative and financial consequences, which precludes the phenomenon from being regarded as ad hoc and isolated, since it has been sufficiently present and recurring as to justify legislative action.

47Third, the risk of losses following a theft, in this case the risk of having to bear at its own expense the quantities of electricity lost as a result of the unlawful usage thereof by a third party, constitutes a typical commercial risk of an economic activity, in this case that of an operator of an electricity distribution network.

48Consequently, subject to a verification of the abovementioned facts by the referring court, it must be held that Article 9(1) of Directive 2006/112 must be interpreted as meaning that the supply of electricity by a distribution network operator, even if involuntary and the result of unlawful conduct on the part of a third party, constitutes an economic activity of that operator inasmuch as it gives rise to a risk inherent in its activity as a distribution network operator.

49Even if it were accepted, first, that Fluvius is a body governed by public law within the meaning of Article 13(1) of Directive 2006/112 and, second, that it acted as a public authority in supplying electricity to MX, that supply of goods should, in principle, be subject to VAT (see paragraph 43 of the present judgment), unless Fluvius’s activity in that regard can be regarded as being carried out on such a small scale as to be negligible.

50Subject to the assessment to be made by the referring court, since the national court alone has jurisdiction to interpret the law of the Member State concerned, it should be borne in mind that Fluvius’s articles of association classify it as a legal person governed by public law with a sui generis status, as confirmed by the Belgian Government in its observations. Furthermore, as indicated in paragraph 19 of the present judgment, Fluvius, as an inter-municipal cooperation structure, is administered by the elected representatives of the municipalities participating in that cooperation and its tasks are those of those municipalities, carried out jointly. Thus, in the light of those documents before the Court, notwithstanding the designation ‘association charged with a mission’ (Opdrachthoudende vereniging), a body such as Fluvius appears to fall within the definition of a body governed by public law within the meaning of Article 13(1) of Directive 2006/112.

51Furthermore, Fluvius’s obligation referred to in paragraph 45 of the present judgment appears to correspond to a public service obligation, in so far as it seeks to prevent persons without a commercial contract with an energy supplier, for example for reasons of economic insecurity, from being deprived of an electricity supply.

52Therefore, it is necessary to determine what may be services carried out on such as small scale as to be negligible within the meaning of the third subparagraph of Article 13(1) of Directive 2006/112 and whether the supply of electricity by an energy distribution network operator, in the context of an unlawful usage of electricity, may come within the scope thereof.

53By providing, in that provision, that the activities listed in Annex I to that directive, such as the distribution of electricity, are, in any event, unless they are carried out on such a small scale as to be negligible, to be subject to VAT, even if they are carried out by a body governed by public law acting as a public authority, the EU legislature sought to avoid certain distortions of competition (see, to that effect, judgment of 16 July 2009, Commission v Ireland, C‑554/07, EU:C:2009:464, paragraphs 72 and 73 and the case-law cited).

54It follows that the concept of ‘negligible activity’ constitutes a derogation from the general rule that any activity of an economic nature is subject to VAT. Therefore, that concept must be interpreted strictly (see, to that effect, judgment of 25 February 2021, Gmina Wrocław (Transformation of the right of usufruct), C‑604/19, EU:C:2021:132, paragraph 77 and the case-law cited).

55As a result, that activity is not subject to VAT only if it is possible to regard the activity referred to in Annex I to Directive 2006/112, carried out by a body governed by public law acting as a public authority, as being of such minimal scale in space or time and, consequently, of such a slight economic impact that the distortions of competition likely to result are liable to be, if not nil, at the very least insignificant.

56In the light of the considerations set out in paragraphs 45 and 46 of the present judgment, it appears that that is not the case with the supply of electricity by a distribution network operator such as Fluvius, including in the context of an unlawful usage of electricity, since both the Flemish Region and Fluvius were led to make provision for the administrative and financial consequences of unlawful usages, which is indicative of their being significant. Consequently, a supply of electricity such as that at issue in the main proceedings does not form part of a negligible activity and must therefore be subject to VAT.

57In the light of the foregoing, the answer to the third and fourth questions referred is that Article 9(1) of Directive 2006/112 must be interpreted as meaning that the supply of electricity by a distribution network operator, even if involuntary and the result of unlawful conduct on the part of a third party, constitutes an economic activity of that operator inasmuch as it gives rise to a risk inherent in its activity as an electricity distribution network operator. Where that economic activity is carried out by a body governed by public law acting as a public authority, such an activity, referred to in Annex I to that directive, can be regarded as being carried out on such a small scale as to be negligible within the meaning of the third subparagraph of Article 13(1) of that directive only if it is of such minimal scale in space or time and, consequently, of such a slight economic impact that the distortions of competition likely to result are liable to be, if not nil, at the very least insignificant.

Costs

58Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the referring court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable.

Operative part

On those grounds, the Court (Seventh Chamber) hereby rules:

Article 2(1)(a) of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax, as amended by Council Directive 2009/162/EU of 22 December 2009, read in conjunction with Article 14(1) of that directive,

must be interpreted as meaning that the supply of electricity by a distribution network operator, even if involuntary and the result of unlawful conduct on the part of a third party, constitutes a supply of goods for consideration entailing the transfer of the right to dispose of tangible property.

Article 9(1) of Directive 2006/112, as amended by Directive 2009/162,

must be interpreted as meaning that the supply of electricity by a distribution network operator, even if involuntary and the result of unlawful conduct on the part of a third party, constitutes an economic activity of that operator inasmuch as it gives rise to a risk inherent in its activity as an electricity distribution network operator. Where that economic activity is carried out by a body governed by public law acting as a public authority, such an activity, referred to in Annex I to that directive, can be regarded as being carried out on such a small scale as to be negligible within the meaning of the third subparagraph of Article 13(1) of that directive only if it is of such minimal scale in space or time and, consequently, of such a slight economic impact that the distortions of competition likely to result are liable to be, if not nil, at the very least insignificant.

Signatures

[Signatures]

( *1 ) Language of the case: Dutch.

OPINION OF ADVOCATE GENERAL

KOKOTT

delivered on 12 January 2023 ¹

(Reference for a preliminary ruling – Value added tax (VAT) – Directive 2006/112/EU – Taxable transactions – Taxable person – Illegal consumption of electricity – Charging by the competent distribution network operator for illegally consumed electricity – Concept of ‘economic activity’ – Concept of ‘other body governed by public law’ – Negligible scope of activities referred to in the third subparagraph of Article 13(1) of the VAT Directive)

I. Introduction

1In this request for a preliminary ruling, the Court must consider the consequences of ‘electricity theft’ in terms of value added tax (VAT). This is because the referring court is unsure whether an illegal user of electricity must pay for the electricity consumed plus any VAT incurred or only the so-called net price without VAT. In the present case, the distribution network operator discovered that a person had unlawfully taken electricity at his residential address for his personal use and subsequently charged the ‘electricity thief’ for it.

2The Court is thus confronted with the fundamental question whether a consumer who is acting unlawfully has to bear VAT in the same way as a consumer who is acting lawfully if he or she (the consumer who is acting unlawfully) consumes a similar amount of electricity – or whether he or she can ‘save’ himself the VAT. In essence, this depends entirely on whether even an ‘involuntary’ supply to a consumer by a taxable person constitutes an assessable and taxable transaction pursuant to VAT law.

II. Legal framework

A. Union law

3Directive 2006/112/EC on the common system of value added tax (the ‘VAT Directive’) determines the EU legal framework. ²

4Article 2(1)(a) of the VAT Directive provides:

‘The following transactions shall be subject to VAT:

the supply of goods for consideration within the territory of a Member State by a taxable person acting as such’.

5Article 9(1) of the VAT Directive provides:

‘“Taxable person” shall mean any person who, independently, carries out in any place any economic activity, whatever the purpose or results of that activity.

Any activity of producers, traders or persons supplying services, including mining and agricultural activities and activities of the professions, shall be regarded as “economic activity”. The exploitation of tangible or intangible property for the purposes of obtaining income therefrom on a continuing basis shall in particular be regarded as an economic activity.’

6Article 13(1) of the VAT Directive provides:

‘(1) States, regional and local government authorities and other bodies governed by public law shall not be regarded as taxable persons in respect of the activities or transactions in which they engage as public authorities, even where they collect dues, fees, contributions or payments in connection with those activities or transactions.

However, when they engage in such activities or transactions, they shall be regarded as taxable persons in respect of those activities or transactions where their treatment as non-taxable persons would lead to significant distortions of competition.

In any event, bodies governed by public law shall be regarded as taxable persons in respect of the activities listed in Annex I, provided that those activities are not carried out on such a small scale as to be negligible.’

7Article 14(1) and Article 14(2)(a) of the VAT Directive determine when there is a supply:

‘(1) “Supply of goods” shall mean the transfer of the right to dispose of tangible property as owner.

(2) In addition to the transaction referred to in paragraph 1, each of the following shall be regarded as a supply of goods:

the transfer, by order made by or in the name of a public authority or in pursuance of the law, of the ownership of property against payment of compensation’.

8Article 15(1) of the VAT Directive concerns the supply of electricity and clarifies:

‘Electricity, gas, heat, refrigeration and the like shall be treated as tangible property.’

B. Belgian law

9The Belgian BTW-Wetboek (‘Belgian VAT Code’) has implemented the VAT Directive in Belgium. In addition, the Flemish Energiebesluit (‘Energy Decision’) contains regulations concerning the supply of energy and invoicing for such supply.

10Article 5.2.3(1) of the Energy Decision provides that a household customer whose contract is terminated by his energy supplier, e.g. for non-payment, and who does not enter into a new contract with another energy supplier, should be supplied by the distribution network operator.

11Specific provisions regulating the unlawful usage of energy, and compensation for it, have applied since 1 May 2018, following the amendment of the Energiedecreet (‘Energy Decree’) and the Energy Decision. These provisions are currently set out in Article 1.1.3(40)(1) read in conjunction with Article 5.1.2 of the Energy Decree and Article 4.1.2 of the Energy Decision.

12Article 1.1.3(40)(1) of the Energy Decree defines the term energy fraud as any unlawful act by a person, whether active or passive, which involves obtaining an undue advantage.

13Article 5.1.2 of the Energy Decree also stipulates that the relevant network user should bear the costs incurred by the network operator to undo the energy fraud as defined in Article 1.1.3(40)(1), the costs of disconnection, the regularisation of the connection or of the metering device, the reconnection, the unlawfully obtained advantage, the costs of the unlawfully obtained advantage and interest. It also stipulates that the network operator or its representative should claim the specified costs, together with the unlawfully obtained advantage and interest, directly from the network user.

14Article 4.1.2(1) of the Energy Decision prescribes how the undue advantage should be calculated, and which items the unlawfully obtained advantage includes. The unlawfully obtained advantage thus includes, inter alia, any costs that have been avoided for the energy supplied (Article 4.1.2(1), third paragraph, point 4 of the Energy Decision).

15Article 4.1.2(3) of the Energy Decision further provides that the compensation charged for the unlawfully obtained advantage should be determined in a precisely defined manner and should indeed include taxes, levies and VAT.

III. Facts of the case and reference for a preliminary ruling

16The natural person MX (‘the defendant’) was sued by the distribution network operator Fluvius Antwerpen (‘Fluvius’) for the payment of EUR 813.41 (including VAT) for electricity consumption during the period from 7 May 2017 to 7 August 2019.

17It appears from publicly available information on the internet that Fluvius, the distribution network operator, is a legal person which is governed by public law and, as an association of several municipalities, has been entrusted with tasks that are in the public interest. These include the management of distribution networks in respect of electricity and gas in accordance with the Flemish regulations. Fluvius, on the other hand, asserts that it is a civil entity, which the Kingdom of Belgium designates as a legal form sui generis.

18Fluvius charged the defendant the sum of EUR 813.41, which included EUR 131.45 in VAT, for its supply of electricity. That charge did not take place because Fluvius had supplied electricity to the defendant on the basis of its public service obligation under Article 5.2.3(1) of the Energy Decision. It occurred because the defendant took electricity at his residential address without having concluded a contract with a commercial energy supplier and without his contract having been terminated at that address by a (different) commercial energy supplier. The referring court considers that using electricity from the network, without concluding a commercial contract and notifying this to the distribution system operator, may be regarded as an unlawful act that involved obtaining an undue advantage and therefore constitutes energy fraud.

19The charge occurred after Fluvius had over time established the actual electricity usage (‘the unlawful usage’). Based on a comparison between the meter reading at the start of the unlawful usage and the meter reading at the end of the unlawful usage, it invoiced the sum of EUR 813.41, which included EUR 131.45 in VAT, for the usage over that period.

20Fluvius’s connection rules govern the invoiced period. However, those connection rules are silent as to the amount of compensation that should be charged in the event of unlawful usage and as to whether VAT should be levied on that compensation. They merely state, under the heading ‘Unlawful usage of energy and compensation for regularisation’, that the distribution network operator will charge the user for both registered and, if applicable, unregistered consumption which results from unlawful usage.

21Fluvius takes the view that the network operator can charge the user for usage, even if it takes place without a supply contract. Under the Belgian VAT Code, VAT should be charged on this unlawful usage. It provides namely that there is a supply subject to VAT if there is a transfer of the ownership of property against payment of a fee pursuant to an order made by or in the name of a public authority or, more generally, pursuant to a law, decree, ordinance, decision or administrative regulation.

22Prior to 1 May 2018, there was no regulatory text expressly stating whether or not VAT ought to be charged on the sum (which the referring court refers to as compensation) that was payable by a person who had taken energy unlawfully. Rules on this matter have applied since 1 May 2018, following the amendment of the Energy Decree and the Energy Decision, and these also provide for VAT to be charged. However, the referring court is unsure whether these provisions, which provide for VAT to be charged, are contrary to the VAT Directive.

23The Vredegerecht te Antwerpen (Magistrates’ Court of Antwerp, Belgium) has therefore decided to stay the proceedings and to refer the following questions to the Court for a preliminary ruling:

Must Article 2(1)(a), read in conjunction with Article 14(1) of the VAT Directive, be interpreted as meaning that the unlawful usage of energy is a supply of goods, being the transfer of the right to dispose of tangible property as owner?

If not, must Article 14(2)(a) of the VAT Directive be interpreted as meaning that the unlawful usage of energy is a supply of goods, being a transfer, by order made by or in the name of a public authority or pursuant to the law, of the ownership of property against payment of compensation?

Must Article 9(1) of the VAT Directive be interpreted as meaning that, if Fluvius is entitled to compensation for unlawfully taken energy, it is to be regarded as a taxable person since the unlawful usage is the result of an ‘economic activity’ of Fluvius, namely the exploitation of tangible property for the purposes of obtaining income therefrom on a continuing basis?

If Article 9(1) of the VAT Directive must be interpreted as meaning that the unlawful usage of energy constitutes an economic activity, must the first paragraph of Article 13(1) of the VAT Directive then be interpreted as meaning that Fluvius is a public authority and, if so, must the third paragraph of Article 13(1) then be interpreted as meaning that the unlawful usage of energy is the result of an activity of Fluvius that is not carried out on such a small scale as to be negligible?’

24Fluvius, the Kingdom of Belgium and the European Commission submitted written observations in the proceedings before the Court. In accordance with Article 76(2) of the Rules of Procedure, the Court decided not to hold an oral hearing.

IV. Legal assessment

25Through questions 1 and 2, the referring court seeks to ascertain, in essence, whether unlawful usage of electricity at the expense of the distribution network operator constitutes an assessable and taxable transaction for the purposes of VAT law. Article 15 of the VAT Directive provides that electricity should be treated as tangible property. Since the defendant consumed this property, it must be considered whether a supply in terms of Article 14(1) or (2) of the VAT Directive (see A.) existed. If there is an assessable and taxable supply of electricity, the referring court would also like to know whether Fluvius is thereby engaged in economic activity (see B.) and whether Article 13 of the VAT Directive might nevertheless exclude taxability (see C.).

A. Unlawful usage of electricity as a supply under Article 14(1) or Article 14(2)(a) of the VAT Directive (Questions 1 and 2)

26The first two questions aim to establish whether and, if so, in accordance with which provision a supply of goods for consideration within the meaning of Article 2(1)(a) of the VAT Directive is present in this case. If the defendant had acted in accordance with the law, no one would doubt that an assessable and taxable supply of electricity (within the meaning of Article 15 of the VAT Directive) had taken place. The question only arises because the defendant took electricity without first concluding an electricity contract with an energy supplier and without the requirements for a statutory obligation relationship (such as a ‘basic supply’ by the distribution network operator) having been satisfied.

27Under Belgian law, the distribution network operator has therefore suffered ‘electricity theft’. It has, however, discovered the theft and now wants the ‘thief’ to pay for the electricity that he has taken. The applicable Belgian energy decision describes that as an undue advantage on the part of the relevant user (the ‘thief’), which can be charged for as compensation. In other Member States, one might speak of compensation for value or even damages.

28The requirements of Article 2(1)(a) and Article 14(1), read in conjunction with Article 15, of the VAT Directive have in fact all been satisfied. According to these provisions, the supply of goods carried out by a taxable person as such in the territory of a Member State for consideration is subject to VAT. The place of supply was Belgium, Fluvius was a distribution network operator that was subject to VAT (whether it also acted as such in this respect is discussed in response to the third question under B.), and Article 15 of the VAT Directive provides that electricity should be treated as tangible property.

29On withdrawal of the electricity, the right of disposal (within the meaning of Article 14 of the VAT Directive) was also transferred from Fluvius to the defendant, who then immediately consumed the electricity. Fluvius may not have agreed to this consumption but could not prevent it. It can therefore be said that Fluvius objectively – although perhaps unwillingly – supplied goods to the defendant. In return, the defendant must now pay a sum of money depending on the amount of electricity consumed, so that this supply also took place for consideration.

30Prima facie, the VAT Directive does not treat an illegal user of electricity (in this case the defendant) differently from a law-abiding user of electricity. Both have to pay a VAT-inclusive price (one in accordance with a contract, and the other by operation of law) for their objective consumption of electricity. Neither VAT law’s nature as a consumption tax nor the principles of neutrality or proportionality stand in the way of that result. On the contrary, the principle of neutrality requires that lawful and unlawful activities should be treated equally in principle. ³

31Nevertheless, the referring court in Belgium apparently considers that the defendant’s illegal usage of electricity could constitute a non-taxable event. In that case, the defendant could not be charged for VAT under the VAT Directive. The crucial question is therefore whether an otherwise assessable and taxable supply of electricity should be treated as non-taxable solely because the consumer obtained the supplied goods (in this case, the electricity) for himself illegally, but is nevertheless obliged – not contractually, but by operation of law – to pay a comparable amount for the goods based on the amount he consumed.

1. The taxation of illegal activities under VAT law

32To the best of my knowledge, the Court has not yet ruled on the question of the illegal procurement of a consumer good by the service recipient. However, there is well-established case-law on how to deal with the service supplier’s illegal activities in VAT law.

33According to that case-law, the principle of fiscal neutrality in the area of VAT collection precludes any general distinction between legal and illegal transactions. ⁴ According to the Court, a distinction is permitted only in cases in which, due to the special characteristics of particular goods, there is no possibility of competition between a legal and an illegal economic sector. ⁵

34In any case, no such res extra commercium exception applies in the present case. Electricity is not a commodity whose marketing is prohibited because of its nature or its relevant characteristics. Consequently, legal and illegal supplies of electricity must be treated in the same way for VAT purposes.

35The case-law has so far only concerned illegal activities on the part of the service supplier. However, service recipients can also be engaged in business activities, and can therefore also be competitors. If they are not fully entitled to deduct input tax, not taxing their illegal activities would give them a competitive advantage and thereby violate the principle of fiscal neutrality. The illegal procurement of a consumer good by a service recipient should therefore be treated in the same way as if it had been procured legally.

2. The nature of VAT as a general tax on consumption

36The fact that VAT is a general tax on consumption also supports the argument that legal and illegal use of electricity should be treated equally. It aims to tax a consumer’s financial capacity, which is reflected in his expenditure of wealth to procure a consumable benefit. ⁶ Illegally consumed electricity is such a consumable benefit. The ‘electricity thief’ must also expend money on it in such a case.

37If the financial expenditure incurred for an end user’s consumption of goods should generally be taxable, it is irrelevant whether the consumption took place illegally, without the service provider’s knowledge or even against its will, so long as money had to be expended for it.

38This approach can readily be inferred from the Court’s case-law. In some decisions, the Court has held that a supply of goods or services for consideration exists if there is a direct link between the service provided and the consideration received. ⁷ The key factor was whether the amount of the benefits was related to the amount of the consideration. ⁸ Since, in this case, the amount of electricity illegally taken (i.e. the value of the benefit) is directly related to the amount that Fluvius has claimed, the requirement for a supply of electricity by Fluvius to the defendant for consideration appears to be satisfied.

39The Court later placed more emphasis on a service only being provided ‘for consideration’ if there is a legal relationship between the service supplier and the service recipient. ⁹ However, this does not change anything, because the Court has so far left open what quality such a legal relationship should have. This question should be considered quite broadly in the context of a general tax on consumption. ¹⁰ It does not have to be a ‘normal’ contractual legal relationship, because even a so-called debt of honour could not prevent a link from arising between the service and consideration which is paid as a matter of ‘honour’. ¹¹

40Consequently, any legal relationship between the service supplier and the service recipient will suffice. This will generally be a contractual legal relationship, but it could be a statutory legal relationship. The decisive factor is the direct link between the monetary payment and a specific consumer good. ¹² The Court therefore affirmed the existence of a service for consideration even if a ‘contractual penalty’ (corresponding to the price that would have been payable if there had been no termination) became payable due to a premature termination. ¹³ The same applied if a motorist used a parking space in breach of contract. ¹⁴

41In the present case, there is likewise a direct link between the monetary payment and the consumption of the electricity that was taken. The Energy Decision, which regulates payment for this electricity, undoubtedly establishes a legal relationship, namely a statutory legal relationship between the distribution network operator (Fluvius) and the consumer (the defendant).

42Why an honest electricity consumer should be burdened with a tax that a dishonest (illegal) electricity consumer does not have to bear, despite a common market for these services existing and both spending money for the same consumable benefit, is also hard to reconcile with Article 20 of the Charter of Fundamental Rights of the European Union. There are no obvious factual grounds that would justify unequal treatment of this sort.

3. Converse inference from Article 14(2)(a) of the VAT Directive

43That result is confirmed by a converse inference (argumentum e contrario) from Article 14(2)(a) of the VAT Directive. That provision makes it plain that a transfer of ownership of property (which is the prototype of a transfer of a right of disposal within the meaning of Article 14(1) of the VAT Directive) is regarded as a supply of goods, even if the transfer takes place by order of a public authority or pursuant to the law and compensation is payable for it.

44The requirements of Article 14(2)(a) of the VAT Directive have not been satisfied in this case – contrary to the Kingdom of Belgium’s submissions. Article 14(2)(a) of the VAT Directive assumes that the transfer of ownership of property takes place by order of a public authority or pursuant to the law. ¹⁵ The classic case in which Article 14(2)(a) of the VAT Directive would apply is therefore an expropriation against payment of compensation.

45In that case, however, the transfer of ownership of the property (in the present case, electricity) does not take place on the basis of an order of a public authority or pursuant to the law, but on the basis of the defendant taking the property illegally and immediately consuming it. Fluvius is only compelled as a matter of fact to tolerate this deprivation. The defendant, on the other hand, owes his payment pursuant to the law (in the present case, pursuant to the Energy Decision).

46However, Article 14(2)(a) of the VAT Directive is based on the view that it should make no difference whether a taxable person transfers a consumer good for consideration voluntarily or involuntarily. This view was even clearer in the Commission’s original proposal for a sixth directive, which still stated in Article 5(2) that a supply should be deemed to include: ‘(f) the transfer, by order made by or in the name of a public authority, of the ownership in property against payment of compensation, where the transfer of such property by private agreement would attract liability to the tax’. ¹⁶ That showed more clearly that the legislator’s key concern was that equivalent consumer supplies should be treated equally. Why or on what basis a consumer good is transferred against payment of consideration should be irrelevant.

47This view is still discernible in the wording of Article 14(2)(a) of the VAT Directive. In my opinion, it can also be readily applied to the present case. If the owner of the electricity (Fluvius) cannot prevent its ownership from being transferred as a result of illegal usage, but receives a consumption-based payment for it pursuant to the law, then that speaks in favour of a supply for consideration, which (although involuntary) is subject to VAT. That will apply in particular if the process would have been subject to VAT if the owner of the electricity had supplied it voluntarily (i.e. pursuant to a contract).

48If a transfer of ownership that takes place involuntarily because the law requires it constitutes a supply, that will apply a fortiori with a transfer of ownership that also takes place involuntarily when the law does not require the transfer but does impose an obligation to pay compensation. In each case, the owner has no choice but to accept its loss of ownership and receives remuneration or compensation for that loss from the recipient of the service (the consumer).

4. Interim conclusion

49I am therefore of the opinion – together with the Commission – that the factual requirements of Article 14(1) of the VAT Directive have been satisfied. The effect of the electricity being taken was for Fluvius to make (or, more precisely, tolerate) a supply of electricity, which the law requires to be remunerated. This constitutes a supply for consideration.

50Article 2(1)(a) read in conjunction with Article 14(1) of the VAT Directive must therefore be interpreted as meaning that unlawful usage of electricity is a supply of goods for consideration, if the remuneration that is to be paid pursuant to law is structured to be as dependent on consumption as it would have been in the case of lawful usage. An energy consumer who is acting dishonestly cannot be treated more favourably for VAT purposes than one who is acting honestly.

B. Supply that results from an unlawful usage of electricity constituting an economic activity of a distribution network operator such as Fluvius (Question 3)

51The referring court’s third question concerns Article 9(1) of the VAT Directive. In essence, the referring court wishes to know whether a distribution network operator, which does not normally act as an electricity supplier, should be treated as a taxable person with respect to the electricity that has been taken unlawfully.

52In essence, that raises the question of how to treat paid activities that are not part of a person’s actual main activities. That question arises more frequently for natural persons because it essentially concerns the demarcation between entrepreneurial activities (which are subject to VAT) and private activities (which are not subject to VAT). However, it seems improbable that a distribution network operator’s supply of electricity against payment should constitute a non-entrepreneurial (or even private) activity, since it would otherwise have to compensate for any missing electricity quantities at its own expense.

53In this case, the supply of electricity is directly related to the role of a distribution network operator. Belgian distribution network operators apparently have to compensate at their own expense for any electricity shortages that result from third parties using electricity illegally. Consequently, the law (in the present case the Energy Decision) already assigns this risk of making ‘unconscious’ supplies within the framework of statutory legal relationships to Fluvius’s economic activity, thus giving rise to an entrepreneurial risk that is inherent in Fluvius’s activity as a distribution network operator.

54Article 9(1) of the VAT Directive should therefore be interpreted as meaning that a distribution network operator’s supply of electricity also constitutes an economic activity on its part if and because doing so gives rise to a risk that is inherent in its economic activity as a distribution network operator.

C. On the taxable status of a public distribution network operator under Article 13(1) of the VAT Directive (Question 4)

55The fourth question consists of two parts. The first part of the fourth question is whether ‘the first paragraph of Article 13(1) of the VAT Directive [must] then be interpreted as meaning that Fluvius is a public authority’ (meaning an ‘other body governed by public law’, since the term public authority is not used in some language versions of Article 13 and in any event not used in others to describe the status of the actor). This is a question concerning the assessment of the specific facts of the case, and only the referring court is competent to answer it.

56The Court has not been given sufficient factual information to answer a modified question as to whether a distribution network operator in Fluvius’s legal form should be regarded as an ‘other body governed by public law’. If Fluvius is, for example, a person governed by private law, as it submitted, then it cannot be an ‘other body governed by public law’.

57It is difficult to reconcile the wording of the VAT Directive with an interpretation of the term ‘body governed by public law’ in the sense of a ‘body governed by private law’, all the more so if Article 13(1) of the VAT Directive should indeed be ‘interpreted strictly’. ¹⁷ It is true that, in the Saudaçor case, the Court considered it possible for a limited company that was organised under private law to be considered an ‘other body governed by public law’ under certain circumstances. ¹⁸ However, the Court expressed the requirements therefor (integration into the public administration, exercise of official authority, and sovereign powers) ¹⁹ in such a way that they could never actually exist as regards a limited company organised under private law.

58However, it appears from publicly available information on the internet that Fluvius, the distribution network operator, is a legal person which is governed by public law and, as an association of several municipalities, has been entrusted with tasks that are in the public interest. In that case, one can certainly speak of an ‘other body governed by public law’ and the first part of the referring court’s fourth question is unclear.

59In the second part of the fourth question, the referring court requests an interpretation of the third subparagraph of Article 13(1) of the VAT Directive. This provides that bodies governed by public law should be regarded as taxable persons in respect of the activities listed in Annex I (and the supply of electricity is one of them – see point 2), even if they are carrying out activities that they are responsible for within the framework of public authority. That applies even if the treatment of those activities as non-taxable transactions would not lead to significant distortions of competition (second subparagraph). However, the third subparagraph contains an exception to this general principle of taxability: ‘provided that those activities are not carried out on such a small scale as to be negligible’. The referring court has requested an interpretation of this exception.

60It appears to start from the false premiss that transactions should be regarded as non-taxable per se if they result from activities listed in Annex I that are carried out on such a small scale as to be negligible. However, the provision contained in the third subparagraph of Article 13(1) of the VAT Directive only applies if the requirements of Article 13(1) have been satisfied. It is only intended to ensure that bodies that are governed by public law and carry out the typical consumer supply activities listed in Annex I are treated as taxable persons per se, even if they are acting in this respect within the framework of public authority. Accordingly, if the requirements of Article 13(1) (activities within the framework of public authority) or its second subparagraph (no significant distortions of competition) of the VAT Directive have not been satisfied, the third subparagraph and its exemption of negligible activities are irrelevant.

61However, the referring court did not explain why Fluvius’s supply of electricity (which is covered by point 2 of Annex I) in its capacity as a distribution network operator constituted an activity that Fluvius was responsible for within the framework of public authority (Article 13(1) of the VAT Directive). The fact that Fluvius has had to sue before a civil court for payment for its supplies of electricity suggests that this was not the case. It is also impossible for the Court to assess whether treating those supplies as non-taxable would lead to significant distortions of competition (Article 13(1), second subparagraph of the VAT Directive). That would probably depend on the volume of the electricity supplies, which the referring court has also not communicated. The figures that Fluvius has provided somewhat indicate a distortion of competition.

62If the referring court nevertheless concludes that the supply of electricity in the context of unlawful usage is an activity that Fluvius is responsible for within the framework of public authority, the third subparagraph will indeed be applicable even if not taxing Fluvius would not lead to significant distortions of competition. Fluvius would then have to be regarded as a taxable person because its electricity supplies were covered by Annex I, unless those activities were carried out on such a small scale as to be negligible. But even then, the exception in the third subparagraph would not, in my view, apply in this case.

63As I have already explained elsewhere, ²⁰ Article 13 of the VAT Directive is based on the premiss that activities in which the State engages as a public authority in the role of tax creditor do not need to be taxed again in order to maintain competitive neutrality. ²¹ Such ‘official activities’ are generally not economic activities within the meaning of Article 9 of the VAT Directive, according to the required typological approach.

64If they are, Article 13(1) of the Directive prevents, in certain circumstances and in terms of a simplification rule, tax obligations (including deduction, recording and declaration obligations) from arising for the State. Consequently, ‘negligible activities’ within the meaning of the third subparagraph can only be present if the simplification approach is still relevant. That assumes that the body governed by public law would now become subject to special deduction, recording and declaration obligations solely because of its negligible activities listed in Annex I.

65That is not the case here because Fluvius is already a taxable person due to its activity as a distribution network operator. The taxability of electricity supplies caused by unlawful usage does not result in any additional obligations that should be avoided by applying a simplification rule. Such a restrictive approach is in line with the Court’s case-law, which requires Article 13(1) of the VAT Directive to be interpreted strictly. ²²

V. Conclusion

Conclusion

66I therefore propose that the Court reply as follows to the questions that the Vredegerecht te Antwerpen (Magistrates’ Court of Antwerp, Belgium) has referred for a preliminary ruling:

Article 2(1)(a) read in conjunction with Article 14(1) of the Council Directive 2006/112/EC on the common system of value added tax (‘the VAT Directive’) must be interpreted as meaning that unlawful usage of energy is a supply of goods for consideration, if the remuneration that is payable pursuant to law is dependent on consumption.

Article 9(1) of the VAT Directive must be interpreted as meaning that, if a distribution network operator additionally supplies electricity, that can also be regarded as an economic activity on its part. That is the case if the supply, for example due to illegal electricity usage, constitutes a risk inherent in its economic activity as a distribution network operator.

Negligible activities within the meaning of the third subparagraph of Article 13(1) of the VAT Directive can only be present if the body governed by public law should not be regarded as a taxable person on the basis of other activities.

¹ Original language: German.

² Council Directive of 28 November 2006 (OJ 2006 L 347, p. 1) in the version in force during the relevant years (May 2017 to August 2019).

³ J. Kokott, EU Tax Law, 2022, p. 127; paragraph 3 marginal numbers 33 et seq. and 36 et seq. with further references.

⁴ See only judgments of 10 November 2011, Rank Group (C‑259/10 and C‑260/10, EU:C:2011:719, paragraph 45); of 6 July 2006, Kittel and Recolta Recycling (C‑439/04 and C‑440/04, EU:C:2006:446, paragraph 50); and of 29 June 1999, Coffeeshop ‘Siberië’ (C‑158/98, EU:C:1999:334, paragraphs 14 and 21).

⁵ This applies, for example, to narcotic drugs and counterfeit currency. See judgments of 29 June 1999, Coffeeshop Siberië (C‑158/98, EU:C:1999:334, paragraph 21); 11 June 1998, Fischer (C‑283/95, EU:C:1998:276, paragraph 21); of 28 May 1998, Goodwin and Unstead (C‑3/97, EU:C:1998:263, paragraph 9); and of 2 August 1993, Lange (C‑111/92, EU:C:1993:345, paragraph 16); of 6 December 1990, Witzemann (C‑343/89, EU:C:1990:445, paragraph 19); and of 5 July 1988, Vereniging Happy Family Rustenburgerstraat (289/86, EU:C:1988:360, paragraph 20). See, however, the Swiss Federal Administrative Court, judgment of 3 May 2007 – A-1342/2006, BVGE-2007-23, paragraph 5.5.1 et seq. (on narcotic drugs), for example.

⁶ See for example: judgments of 3 May 2012, Lebara (C‑520/10, EU:C:2012:264, paragraph 23); of 11 October 2007, KÖGÁZ and Others (C‑283/06 and C‑312/06, EU:C:2007:598, paragraph 37 – ‘it is proportional to the price charged by the taxable person in return for the goods and services which he has supplied’); and of 18 December 1997, Landboden-Agrardienste (C‑384/95, EU:C:1997:627, paragraphs 20 and 23 – ‘Only the nature of the undertaking given is to be taken into consideration: for such an undertaking to be covered by the common system of VAT it must imply consumption’).

⁷ Judgment of 8 March 1988, Apple and Pear Development Council (C‑102/86, EU:C:1988:120, paragraph 12). Likewise judgments of 29 July 2010, Astra Zeneca UK (C‑40/09, EU:C:2010:450, paragraph 27 with further references) and of 16 October 1997, Fillibeck (C‑258/95, EU:C:1997:491, paragraph 12).

⁸ Judgment of 8 March 1988, Apple and Pear Development Council (C‑102/86, EU:C:1988:120, paragraph 15). See also judgment of 16 October 1997, Fillibeck (C‑258/95, EU:C:1997:491, paragraph 16).

⁹ Judgment of 3 March 1994, Tolsma (C‑16/93, EU:C:1994:80, paragraph 14). Likewise judgments of 2 May 2019, Budimex (C‑224/18, EU:C:2019:347, paragraph 30), and of 11 May 2017, Posnania Investment (C‑36/16, EU:C:2017:361, paragraph 31).

¹⁰ For a broad understanding, see also my Opinion in the case of MEO – Serviços de Comunicações e Multimédia (C‑295/17, EU:C:2018:413, points 34 et seq.).

¹¹ Judgment of 17 September 2002, Town & County Factors (C‑498/99, EU:C:2002:494, paragraph 16 et seq.).

¹² To that effect also, see judgment of 20 January 2022, Apcoa Parking Danmark (C‑90/20, EU:C:2022:37, paragraph 37 et seq.).

¹³ Judgment of 22 November 2018, MEO – Serviços de Comunicações e Multimédia (C‑295/17, EU:C:2018:942, paragraph 41 et seq.).

¹⁴ Judgment of 20 January 2022, Apcoa Parking Danmark (C‑90/20, EU:C:2022:37, paragraphs 33 and 34).

¹⁵ Judgments of 25 February 2021, Gmina Wrocław (Transformation of the right of usufruct) (C‑604/19, EU:C:2021:132, paragraph 56), and of 13 June 2018, Gmina Wrocław (C‑665/16, EU:C:2018:431, paragraph 37).

¹⁶ Commission proposal for a sixth directive on the harmonization of legislation of Member States concerning turnover taxes, COM(73) 950 of 20 June 1973.

¹⁷ Judgments of 25 February 2021, Gmina Wrocław (Transformation of the right of usufruct) (C‑604/19, EU:C:2021:132, paragraph 77); of 22 February 2018, Nagyszénás Településszolgáltatási Nonprofit Kft. (C‑182/17, EU:C:2018:91, paragraph 54); of 29 October 2015, Saudaçor (C‑174/14, EU:C:2015:733, paragraph 49); and of 16 September 2008, Isle of Wight Council and Others (C‑288/07, EU:C:2008:505, paragraph 60).

¹⁸ Judgment of 29 October 2015, Saudaçor (C‑174/14, EU:C:2015:733, paragraphs 61 and 68).

¹⁹ Judgment of 29 October 2015, Saudaçor (C‑174/14, EU:C:2015:733, paragraphs 56 et seq.).

²⁰ See my Opinion in the case of Gmina O. (C‑612/21, EU:C:2022:874, point 62).

²¹ See, on the issue of ‘self-taxation by the State’, my Opinion in the case of Gemeente Borsele und Staatssecretaris van Financiën (C‑520/14, EU:C:2015:855, points 23 et seq.).

²² Judgments of 25 February 2021, Gmina Wrocław (Transformation of the right of usufruct) (C‑604/19, EU:C:2021:132, paragraph 77); of 22 February 2018, Nagyszénás Településszolgáltatási Nonprofit Kft. (C‑182/17, EU:C:2018:91, paragraph 54); of 29 October 2015, Saudaçor (C‑174/14, EU:C:2015:733, paragraph 49); and of 16 September 2008, Isle of Wight Council and Others (C‑288/07, EU:C:2008:505, paragraph 60).