C-87/23 Latvijas Informācijas un komunikācijas tehnoloģijas asociācija

JUDGMENT OF THE COURT (Seventh Chamber)

4 July 2024 ( *1 )

(Reference for a preliminary ruling – Taxation – Value added tax (VAT) – Directive 2006/112/EC – Article 2(1)(c) – Supply of services for consideration – Article 9(1) – Concepts of ‘taxable person’ and ‘economic activity’ – Non-profit association carrying out projects financed by the European Regional Development Fund (ERDF) – Supply of training services through subcontractors – Inclusion of the amount of the subsidy in the taxable amount – Article 73)

In Case C‑87/23,

REQUEST for a preliminary ruling under Article 267 TFEU from the Administratīvā apgabaltiesa (Regional Administrative Court, Latvia), made by decision of 14 February 2023, received at the Court on 15 February 2023, in the proceedings

Biedrība ‘Latvijas Informācijas un komunikācijas tehnoloģijas asociācija’

v

Valsts ieņēmumu dienests,

THE COURT (Seventh Chamber),

composed of F. Biltgen, 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:

the Biedrība ‘Latvijas Informācijas un komunikācijas tehnoloģijas asociācija’, by A. Leškoviča, advokāte,

the Latvian Government, by J. Davidoviča, K. Pommere and E. Bārdiņš, acting as Agents,

the European Commission, by P. Carlin, M. Herold and L. Ozola, acting as Agents,

after hearing the Opinion of the Advocate General at the sitting on 7 March 2024,

gives the following

Judgment

Legal context and the dispute

1This request for a preliminary ruling concerns, in essence, the interpretation of Article 2(1)(c), Article 9(1) and Articles 28 and 73 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax (OJ 2006 L 347, p. 1).

2The request has been made in proceedings between the Biedrība ‘Latvijas Informācijas un komunikācijas tehnoloģijas asociācija’ a Latvian information and communication technology association (‘the Association’) and the Valsts ieņēmumu dienests (State Tax Authority, Latvia) (‘the tax authority’) concerning the latter’s refusal to allow the Association to deduct input value added tax (VAT) in respect of invoices sent to it by undertakings providing training services which that association had subcontracted to those undertakings.

Legal context

European Union law

3Under Article 2(1) of Directive 2006/112:

‘The following transactions shall be subject to VAT:

…

the supply of services 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 28 of that directive states:

‘Where a taxable person acting in his own name but on behalf of another person takes part in a supply of services, he shall be deemed to have received and supplied those services himself.’

6Article 73 of that directive is worded as follows:

‘In respect of the supply of goods or services, other than as referred to in Articles 74 to 77, the taxable amount shall include everything which constitutes consideration obtained or to be obtained by the supplier, in return for the supply, from the customer or a third party, including subsidies directly linked to the price of the supply.’

7Under Article 132(1) of Directive 2006/112:

‘Member States shall exempt the following transactions:

…

… vocational training or retraining, including the supply of services and of goods closely related thereto, by bodies governed by public law having such as their aim or by other organisations recognised by the Member State concerned as having similar objects;

…’

Latvian law

The Law on value added tax

8The Pievienotās vērtības nodokļa likums (Law on value added tax) of 29 November 2012 (Latvijas Vēstnesis, 2012, No 197) is intended to transpose Directive 2006/112 into Latvian law.

The Law on associations and foundations

9Article 2(1) of the Biedrību un nodibinājumu likums (Law on associations and foundations) of 30 October 2003 (Latvijas Vēstnesis, 2003, No 161) provides that an association is a voluntary union of persons set up to achieve a non-profit objective laid down in its statutes.

10Under Article 7(1) of that law, associations and foundations are entitled to pursue, on an ancillary basis, economic activities related to the maintenance or exploitation of their assets and also to pursue other economic activities for the purpose of achieving their objectives.

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

11In 2016, the Association, which is established in Latvia, concluded two contracts with the Centrālā finanšu un līgumu aģentūra (Central Finance and Contracting Agency, Latvia) (‘the CFLA’) concerning the implementation of two training projects financed by the European Regional Development Fund (ERDF). Those were, first, a training project for information and communication technology professionals (‘the ICT project’) and, second, a training project for micro- and small enterprises (‘the MSE project’). The tenderer, in the context of the first project, could be an association and, in the context of the second project, an association or a public authority.

12As part of the ICT project, the Association concluded contracts to provide training services to recipients. Under those contracts, those recipients had to pay the Association the costs of the training and the corresponding VAT and, in some cases, management costs equal to 5% or 10% of the amount of aid granted to the Association by the CFLA and to be transferred to those recipients at the end of the ICT project, that amount being increased by VAT. The Association also concluded contracts with training service providers to carry out the training activities in question on its behalf. At the end of the training, those service providers invoiced the Association for the full cost of those services and applied VAT. The Association paid the invoices of those service providers and declared the VAT as input tax. At the end of the project, the Association paid the funds received from the CFLA to the recipients of the training (those payments varied in amount, ranging from 30% to 70% of the cost of the services supplied) and invoiced them for the management costs of the project, amounting to 5% or 10% of the aid granted by the CFLA.

13As part of the MSE project, the Association paid the training service providers in full, which payments included VAT. The contract under which that payment was made had been concluded between the Association, the training service provider and the recipient of those services. Under that contract, the recipient undertook to co-finance the training and the service provider was required to pay the amount corresponding to that co-financing (30% of the total payment, including VAT) to the Association. The funding granted by the ERDF constituted 70% of the total payment, paid at the end of the project to the Association by the CFLA, excluding VAT.

14Following an audit, the tax authority questioned the Association’s ability to deduct input VAT. Consequently, in 2019 and 2021, it adopted eight decisions requiring the Association to pay VAT in the amount of EUR 87 299.37 in respect of the period from January to October 2018, a fine of EUR 611.96 and a late-payment penalty of EUR 7 707.52. It also refused the Association’s request for a refund in respect of the excess VAT recorded in respect of July and September to December 2018, and in respect of February, March, May and December 2019, in the total amount of EUR 101 363.24.

15According to the tax authority, the ICT and MSE projects could be carried out only by an association or by a public authority, but not by an economic operator. Given the Association’s lack of a profit-making objective and the fact that no profits are expected to be made from the implementation of those projects, that implementation cannot be regarded as an economic activity on the part of the Association. That association managed the projects and made payments from European funds, which benefited the recipients of the training services, but it did not itself provide such services and therefore does not have the right to deduct input VAT.

16The Association challenged the decisions of the tax authority, taking the view that its status as an association had no bearing on its right to deduct input VAT. It argued that it was entered in the Latvian register of taxable persons subject to VAT and that, in the context of the ICT and MSE projects, it had provided training services as an intermediary.

17The Administratīvā rajona tiesa (District Administrative Court, Latvia) upheld the actions for annulment of those decisions. The tax authority brought an appeal against the judgments at issue before the Administratīvā apgabaltiesa (Regional Administrative Court, Latvia), the referring court, which joined all the cases brought before it concerning those judgments.

18In those circumstances, the Administratīvā apgabaltiesa (Regional Administrative Court) stayed the proceedings and referred the following questions to the Court of Justice for a preliminary ruling:

Must Article 9(1) of [Directive 2006/112] be interpreted as meaning that a not-for-profit organisation whose activity is aimed at implementing State aid schemes financed by the [ERDF] is to be treated as a taxable person who carries out an economic activity?

Must Article 28 of [Directive 2006/112] be interpreted as meaning that an association which does not actually supply training services is nevertheless to be equated with a supplier of services where the services were acquired from another economic operator in order to ensure the implementation of a State aid project financed by the [ERDF]?

Pursuant to Article 73 of [Directive 2006/112], if a supplier of services receives only partial consideration from the recipient of the service for the service supplied (30%) but the remaining cost of the service is covered by an aid payment from the [ERDF], is the taxable consideration the total amount received by the supplier of services from both the recipient of the service and a third party in the form of an aid payment?’

Consideration of the questions referred

19It should be noted that the first question referred by the referring court concerns the interpretation of the concept of ‘economic activity’ under Article 9(1) of Directive 2006/112, while the second question referred by that court relates, in essence, to the concept of ‘supply of services for consideration’, within the meaning of Article 2(1)(c) of that directive, in conjunction with Article 28 thereof.

20An activity can be regarded as an economic activity within the meaning of Article 9(1) of Directive 2006/112 only where the activity corresponds to one of the chargeable events defined in Article 2 of that directive (judgment of 12 May 2016, Gemeente Borsele and Staatssecretaris van Financiën, C‑520/14, EU:C:2016:334, paragraph 21).

21The second question must therefore be answered first. The answer to that question will then, where appropriate, allow an answer to be given to the third question, by determining whether subsidies such as those which, in the present case, were granted by the CFLA after the ERDF had itself paid those subsidies to the CFLA, form part of the taxable amount for services such as those supplied by the Association in the context of the ICT and MSE projects. Lastly, the first question will be considered, if necessary.

The second question

22In its request for a preliminary ruling, the referring court describes the supply of services invoiced by the Association on the basis of two characteristics relating to their context, namely the use by the Association of subcontractors for the supply of those services, and the subsidisation of those services by the ERDF, through the CFLA.

23It follows that, by that question, the referring court is asking, in essence, whether Article 2(1)(c) of Directive 2006/112, read in conjunction with Article 28 thereof, must be interpreted as meaning that the supply of training services invoiced by a non-profit association, which supply is subcontracted for the most part to third parties and has received subsidies from European funds of up to 70% of the total amount of those services, constitutes a supply of services for consideration.

24It should be recalled that it is for the referring court, which alone has jurisdiction to assess the facts, to determine the nature of the transactions at issue in the main proceedings (judgment of 30 March 2023, Gmina L., C‑616/21, EU:C:2023:280, paragraph 22 and the case-law cited).

25That said, it is nevertheless for the Court of Justice to provide that court with all the guidance as to the interpretation of EU law which may be of assistance in adjudicating on the case before it (judgment of 30 March 2023, Gmina L., C‑616/21, EU:C:2023:280, paragraph 23 and the case-law cited).

26In that regard, it is apparent from the case-law that a supply of services is carried out ‘for consideration’, for the purposes of Article 2(1)(c) of Directive 2006/112, and is therefore taxable, only if there is a direct link between that supply of services, on the one hand, and the consideration actually received by the taxable person, on the other. Such a direct link is established where there is a direct link between the provider of the supply of services, on the one hand, and the recipient, on the other, a legal relationship in which there is reciprocal performance, the remuneration received by the provider of the transactions constituting the actual consideration for the service supplied to that recipient (see, to that effect, judgment 30 March 2023, Gmina O., C-612/21, EU:C:2023:279, paragraph 25 and the case-law cited).

27In order for such a transaction to be regarded as having been carried out ‘for consideration’, within the meaning of that directive, it is not necessary, as is also apparent from Article 73 of that directive, that the consideration for the supply of services must be obtained directly from the recipient thereof, since it may be obtained from a third party (see, to that effect, judgment 30 March 2023, Gmina O., C-612/21, EU:C:2023:279, paragraph 26 and the case-law cited).

28The fact that the price paid for the transaction in question is higher or lower than the cost price, and, therefore, higher or lower than the open market value, is irrelevant for the purpose of establishing whether it was a transaction ‘for consideration’, since that circumstance is not such as to affect the direct link between the transaction supplied and the consideration received or to be received, the amount of which is determined in advance and according to well-established criteria (see, to that effect, judgment 30 March 2023, Gmina O., C-612/21, EU:C:2023:279, paragraph 27 and the case-law cited).

29In the present case, it is apparent from the information provided by the referring court that the Association organises, prepares the material for, and oversees training for information and communication technology professionals (ICT project) and for micro- and small enterprises (MSE project), but that it delegates the performance of that training to subcontractors.

30In the context of the ICT project, subject to verification by the referring court, two supplies of services appear to coexist. The first binds the recipient of the training to the Association, to which the recipient pays the full price charged. After receipt of the grant by the CFLA, the Association transfers the amount due to each recipient of the training service, which has the effect of reducing the price originally paid by that recipient to the Association. The second follows from the contract between the Association and the training company, which it pays for the services rendered.

31It is therefore clear that the Association must be regarded as the supplier of the training services vis-à-vis the recipient of the training. In that regard, it is irrelevant that the Association chose to secure the services of a subcontractor rather than recruit its own staff.

32Article 28 of Directive 2006/112, the wording of which requires the taxable person to act in his, hers or its own name on behalf of another person, is therefore not relevant in the context of a project such as the ICT project since, first, the Association acted in its own name and on its own behalf by invoicing the recipients of the training for the cost of that training and, second, the training company acted in the name and on behalf of another person – that is to say, the Association – by carrying out the training services in question, which were then paid for by the Association.

33In the context of the MSE project, also subject to verification by the referring court, things appear to be slightly different since, as is apparent from paragraph 13 of the present judgment, there is, as in the case of the ICT project, a contract between the Association and a subcontractor for the supply of the training service to the recipients of that training, but the relationship with those recipients is itself defined in another tripartite contract between the Association, the training company and each recipient of the training. That other contract stipulates that the recipient of the training is to bear 30% of the cost of the service; the amount corresponding to that percentage appears to be invoiced by the Association itself. The grant by the CFLA of the subsidy amounting to 70% of the cost of the supply of training services, therefore enables the Association to obtain the full cost.

34It therefore appears, subject to verification by the referring court that there is no agency agreement between the Association and the training company, that notwithstanding the difference with the ICT project relating in particular to the existence of a tripartite contract, it was also in its own name and on its own behalf that the Association supplied, through a subcontractor, the training services in question, since those services were not supplied by the subcontractor in its own name and on its own behalf. Article 28 of Directive 2006/112 is therefore not applicable in the light of the request for a preliminary ruling.

35It should be added with regard to the two projects, first, that the fact that the financing of the supply of training services comes, even to a large extent, from a body such as the CFLA, the CFLA having itself received the sums in question from the ERDF, does not preclude the classification of that supply as a supply of services for consideration, as is clear from the case-law referred to in paragraph 27 of the present judgment, according to which the consideration for the supply of services may be obtained from a third party.

36Second, the fact that the income consisting, first, of the payment of the aid, through the CFLA, from the ERDF and, second, of the remuneration paid by the recipients of the training services fully covers the Association’s costs but does not allow it to make a profit, in accordance with its status as a non-profit association, is also not such as to prevent the supply of services at issue in the main proceedings from being classified as a supply of services for consideration, as follows expressly from the case-law referred to in paragraph 28 of the present judgment, according to which a transaction, even if carried out at a price lower than the cost price, may be classified as a transaction carried out for consideration.

37The answer to the second question is therefore that Article 2(1)(c) of Directive 2006/112 must be interpreted as meaning that the supply of training services invoiced by a non-profit association, which supply has been subcontracted for the most part to third parties and received subsidies from European funds of up to 70% of the total amount of those services, constitutes a supply of services for consideration, without Article 28 of that directive being applicable, in the absence of an express agency agreement capable of establishing the existence of a supply of services by a taxable person in its own name and on behalf of another person.

The third question

38By its third question, the referring court asks whether Article 73 of Directive 2006/112 must be interpreted as meaning that, where the provider of a service receives only partial consideration from the recipient of that service for the service supplied, since the consideration for the remaining cost of that service consists of an aid payment from ERDF resources, the taxable amount corresponds, nevertheless, to the total amount received by the provider of that service.

39It follows both from the case-law cited in paragraph 27 of the present judgment and from the findings set out in paragraph 35 thereof that that question must be answered in the affirmative. Article 73 of that directive must therefore be interpreted as meaning that subsidies paid to a service provider by a European fund for a specific supply of services are, in accordance with that provision, included in the taxable amount as a payment obtained from a third party.

The first question

40By its first question, the referring court asks whether Article 9(1) of Directive 2006/112 must be interpreted as meaning that a non-profit association the activities of which are aimed at implementing State aid schemes financed by the ERDF must be treated as a taxable person carrying out an economic activity.

41In that regard, in the first place, it should be recalled that, subject to the referring court’s assessment of the facts of the case in the main proceedings, it follows from the answer to the second question that the supply of training services in question satisfies the criteria for classifying that supply as a supply of services for consideration within the meaning of Article 2(1)(c) of Directive 2006/112, so that that condition, which is necessary, but not sufficient, for establishing that an economic activity has been carried out, is satisfied.

42In the second place, the analysis of the wording of Article 9(1) of Directive 2006/112, while highlighting the scope of the concept of ‘economic activity’, also clarifies the objective nature of that concept, in the sense that the activity is considered per se and without regard to its purpose or results (judgments of 30 March 2023, Gmina O., C‑612/21, EU:C:2023:279, paragraph 33 and the case-law cited, and of 30 March 2023, Gmina L., C‑616/21, EU:C:2023:280, paragraph 41 and the case-law cited).

43Therefore, the fact that, on account of its legal form, a legal person may engage in commercial activities only on an ancillary basis has no bearing on the existence of an economic activity designed to obtain income on a continuing basis, which is the criterion of economic activity within the meaning of Article 9(1) of that directive (see, to that effect, judgment 2 June 2016, Lajvér, C‑263/15, EU:C:2016:392, paragraph 35 and the case-law cited).

44Consequently, in the main proceedings, it was by misinterpreting that provision that the tax authority took the view that the mere fact that the applicant in the main proceedings was a non-profit association precluded it from carrying on an economic activity within the meaning of that provision.

45In the third place, the fact that the training courses concerned were financed to a large extent by ERDF aid cannot affect the economic or non-economic nature of the activity carried out by the Association, since the concept of ‘economic activity’, on account of its objective nature referred to in paragraph 42 of the present judgment, applies without regard to the method of financing chosen by the operator concerned, which also holds true in relation to public subsidies (judgment of 2 June 2016, Lajvér, C‑263/15, EU:C:2016:392, paragraph 38 and the case-law cited).

46In the fourth place, given the difficulty of establishing a precise definition of economic activity, all the circumstances in which it is supplied have to be examined, by making a case-by-case assessment, referring to the typical conduct of an active entrepreneur in the field concerned (judgments of 30 March 2023, Gmina O., C‑612/21, EU:C:2023:279, paragraph 35 and the case-law cited, and of 30 March 2023, Gmina L., C‑616/21, EU:C:2023:280, paragraph 43 and the case-law cited), that is to say, in the present case, an undertaking that organises and supplies training services.

47In that regard, it is true that the fact that, in fixing the cost of the supply of training services which it invoices to the recipients of those services, the Association seeks solely to cover its operating costs in order to achieve financial equilibrium appears not to correspond to the typical conduct of any entrepreneur, which is to strive for profitability.

48However, that analysis does not correspond to the wording of Article 9(1) of Directive 2006/112 and is also not supported by the facts set out in the order for reference.

49First of all, it follows from the wording of that provision that ‘taxable person’ means any person who, independently, carries out any economic activity, whatever the purpose or results of that activity. It follows that the Association’s aim of simply balancing its accounts is not sufficient to rule out the possibility that it is carrying out an economic activity. For the same reason, an undertaking which seeks to make a profit but the activity of which proves to be loss-making on a long-term basis, for example due to underperformance, would nevertheless remain a taxable person if an analysis of all the circumstances in which that activity is carried out, referred to in paragraph 46 of the present judgment, leads to that activity being regarded as economic in nature.

50Next, the Association acts as an undertaking organising and providing training when it implements training projects financed by the ERDF, through the CFLA. In particular, it seeks out projects, clients and instructors, acquiring their services on a subcontracting basis. It has the recipients of the training services pay part of the cost, assesses their level of knowledge and obtains their feedback on the training, which corresponds to a typical quality survey.

51Nor is it disputed that the Association has its own staff for the organisation of its projects, in addition to the subcontractors on which it relies. It should be borne in mind, in that regard, that subcontracting is quite common in the context of economic life.

52It follows that, from the outside, the Association appears to be a provider of training services or of services relating to the organisation thereof comparable to any other economic operator present on the same market, with which it therefore competes.

53Finally, even if the fact that a large part of its financing is derived from public subsidies appears to create uncertainty as to the economic viability of the Association, it must be emphasised that those subsidies and their foreseeable amount constitute factors on the basis of which the Association draws up its business plan and its search for clients.

54It follows from all those considerations that a non-profit entity such as the Association must be regarded as a taxable person carrying out an economic activity within the meaning of Article 9(1) of Directive 2006/112, so that the supply of training services for which it invoices falls within the scope of that provision.

55That being so, it will nevertheless be for the referring court to verify that that supply of services does not fall within the scope of the exemption provided for in Article 132(1)(i) of that directive, concerning ‘vocational training or retraining’, since that question has not been referred to the Court and there is no information in the case file which would allow that question to be decided.

56In the light of the foregoing considerations, the answer to the first question is that Article 9(1) of Directive 2006/112 must be interpreted as meaning that the status of non-profit association enjoyed by an association does not preclude, following an analysis which takes account of all the circumstances of the association’s activity and, in particular, the fact that that activity is comparable to the typical conduct of an economic operator in the same sector, that association from being regarded as a taxable person carrying out an economic activity within the meaning of that provision.

Costs

57Since 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)(c) of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax

must be interpreted as meaning that the supply of training services invoiced by a non-profit association, which supply has been subcontracted for the most part to third parties and received subsidies from European funds of up to 70% of the total amount of those services, constitutes a supply of services for consideration, without Article 28 of that directive being applicable, in the absence of an express agency agreement capable of establishing the existence of a supply of services by a taxable person in its own name and on behalf of another person.

Signatures

Article 73 of Directive 2006/112

must be interpreted as meaning that subsidies paid to a service provider by a European fund for a specific supply of services are, in accordance with that provision, included in the taxable amount as a payment obtained from a third party.

Article 9(1) of Directive 2006/112

must be interpreted as meaning that the status of non-profit association enjoyed by an association does not preclude, following an analysis which takes account of all the circumstances of the association’s activity and, in particular, the fact that that activity is comparable to the typical conduct of an economic operator in the same sector, that association from being regarded as a taxable person carrying out an economic activity within the meaning of that provision.

[Signatures]

( *1 ) Language of the case: Latvian.

OPINION OF ADVOCATE GENERAL

KOKOTT

delivered on 7 March 2024 ¹

(Request for a preliminary ruling – Tax legislation – Value added tax (VAT) – Directive 2006/112/EC – Articles 2, 9, 28 and 73 – Supply of services for consideration – Meaning of ‘taxable person’ – Economic activity – Typological approach – Non-profit association organising and implementing training projects financed by the European Regional Development Fund (ERDF) – Supply of training services through subcontractors – Inclusion of the funding in the taxable amount)

I. Introduction

1VAT law taxes only transactions in which a taxable person supplies consumer goods to another person (by way of a supply of goods or services). The supply of a service by a non-taxable person (e.g. a private individual) to another person is therefore not taxable, even if it is effected for consideration. The same applies to the deduction of input tax. Only a taxable person is entitled to deduct input tax and only if that person has received the supply from another taxable person.

2As a result, identifying a ‘taxable person’ is of crucial importance. In that regard, the Court of Justice has recently adopted a typological approach to determine whether a municipality ² or a supervisory body of a legal person ³ must be regarded as a taxable person. That approach is also of particular importance in the present case.

3Here, a non-profit association, which is not permitted to make a profit under national law, organised and implemented training services that were co-financed by subsidies. Since that association, as the project owner, had no trainers for that purpose, it called on the services of third-party undertakings. It treated the remuneration from the trainees as consideration for a taxable supply of services, paid the corresponding tax and claimed the deduction of input tax on third parties’ invoices. The tax administration intends to refuse to allow that deduction due to the absence of any economic activity. The association cannot make a profit by law, nor did it supply the training services itself. Given that, under the applicable law, only non-profit organisations or authorities may implement such projects, but not undertakings, that project organisation cannot be an economic activity per se.

4The Court has the opportunity here to specify the criteria for assessing a taxable person’s economic activity within the framework of a typological approach. In doing so, it should clarify that the absence of cost recovery or the absence of profit-making objectives is immaterial, or at most represents one aspect of an overall assessment, but is not sufficient in itself to deny the status of ‘taxable person’.

II. Legal framework

A. European Union law

5Article 2(1)(c) of Directive 2006/112/EC on the common system of value added tax ⁴ (‘the VAT Directive’) provides:

‘The following transactions shall be subject to VAT:

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

6Article 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.’

7Article 28 of the VAT Directive concerns the commissioning of services and reads:

‘Where a taxable person acting in his own name but on behalf of another person takes part in a supply of services, he shall be deemed to have received and supplied those services himself.’

8Article 73 of the VAT Directive governs the taxable amount:

‘In respect of the supply of goods or services, other than as referred to in Articles 74 to 77, the taxable amount shall include everything which constitutes consideration obtained or to be obtained by the supplier, in return for the supply, from the customer or a third party, including subsidies directly linked to the price of the supply.’

9Article 168(a) of the VAT Directive, relating to the deduction of input tax, is worded as follows:

‘In so far as the goods and services are used for the purposes of the taxed transactions of a taxable person, the taxable person shall be entitled, in the Member State in which he carries out these transactions, to deduct the following from the VAT which he is liable to pay:

the VAT due or paid in that Member State in respect of supplies to him of goods or services, carried out or to be carried out by another taxable person; …’

B. Latvian law

10The VAT Directive was transposed into Latvian law by the Pievienotās vērtības nodokļa likums (Law on value added tax), adopted on 29 November 2012 (Latvijas Vēstnesis, 2012, No 197) (‘the Law on VAT’).

11For non-profit associations the Biedrību un nodibinājumu likums (Law on associations and foundations), adopted on 30 October 2003 (Latvijas Vēstnesis, 2003, No 161), is also relevant.

12Under Article 2(1) of that law, associations are voluntary unions of persons set up to achieve the objectives laid down in their statutes, according to which they have a non-profit making character. In accordance with Article 7(1) of that law, however, they are entitled to pursue, on an ancillary basis, an economic activity related to the maintenance or exploitation of their assets and also to pursue another economic activity for the purpose of achieving the objectives of the association or foundation.

III. Facts

13In 2016 the association, Latvijas Informācijas un komunikācijas tehnoloģijas asociācija Informācijas un komunikācijas tehnoloģijas asociācija (Latvian Information and communications technology association; ‘the Association’), was awarded contracts to implement two projects financed by EU funds (from the European Regional Development Fund; ‘the ERDF’), namely Training of information and communications technology professionals for the promotion of innovation and development of industry (‘the ICT Project’) and Training of small and micro-enterprises for the development of innovation and digital technologies in Latvia (‘the MSE Project’). According to the questions referred for a preliminary ruling, the Association is a non-profit organisation acting without the intention of making a profit.

14The Association concluded a corresponding implementing agreement with the Centrālā finanšu un līgumu aģentūra (Central Finance and Contracting Agency; ‘the CFLA’) for both projects. Both projects are covered by public law implementing provisions (Decrees No 617 and No 365 of the Council of Ministers). Under those decrees, only an association or authority of the direct administration may submit a project proposal.

15Under the ICT Project, funding (also ‘aid’) is granted for the training of employees of undertakings in the areas specified in the annex to the respective decree. The provider of the corresponding training services is any legal or natural person who complies with the conditions laid down in that decree. The recipient of funding to implement the project purchases the necessary goods and services in accordance with the legislation on tendering procedures. Aid is granted in the form of a subsidy.

16Under the MSE Project, support is provided for the necessary training to ensure that innovation in matters relating to products, processes, marketing and organisation is integrated in the undertaking. The funding recipient uses external suppliers of training services to carry out the eligible actions set out in that decree. Under that measure, aid is granted to final beneficiaries (the recipients of the training, also referred to as ‘trainees’) in the form of a subsidy. The subsidy is granted indirectly by way of the provision of training (‘Training Services’). The funding recipient delivers the aid to the final beneficiaries.

17As part of the ICT Project, the Association concluded a number of contracts with companies to supply Training Services. The contracts stipulate that the Association will make payment to the undertaking supplying those services once the training recipients have first paid it in full for the training course, the necessary project documents have been submitted, and a record of acceptance and delivery has been signed. In that regard, the Association also concluded contracts with the recipients of the Training Services. Under those contracts the recipient of those services undertakes to first pay the Association the costs of the training and VAT in accordance with the invoices issued by the Association. In certain cases, the recipient of the training also undertakes, under the contract, to pay the Association an ‘administration fee’ of 5% or 10% of the amount of aid granted, plus VAT. For its part, the Association undertakes to transfer the amount of the aid to the recipient of the training, in accordance with the State aid decision, within ten days of receipt of the aid from the CFLA.

18In accordance with the contracts included in the case file and the explanations provided by the Association, under the ICT Project the Association invoiced the recipients of the training for the related courses, including VAT, and entered them in its VAT returns as taxable transactions. The training recipients paid the Association. Once the training finished, the supplier of the training invoiced the Association for the total cost of the Training Services supplied, inclusive of VAT, which the Association paid and declared as input tax. After the project ended, the Association transferred the funding received from the CFLA to the recipients of those services based on the intensity of the aid and also invoiced those recipients, where applicable, for administration of the ICT Project in the amount of 5% to 10% of the amount of the aid.

19In contrast, the MSE Project is structured differently. On the one hand, as in the ICT Project, the Association concluded a contract with a company for the provision of Training Services to small and micro-enterprises. The contract likewise provides that the Association is to pay the selected undertaking for the services supplied in accordance with invoices issued by that undertaking, on which VAT is also to be included. On the other hand, another tripartite agreement was concluded between the Association, the supplier of the Training Services and the undertaking in receipt of those services. Under that contract, the training recipient undertook to fund a proportion of the Training Services (30%). However, it is not clear who invoiced for that pro rata funding and exactly how it was handled. It appears that the Association invoiced the recipient for that 30%, plus VAT, and received it from the latter. The Association in turn received the remaining 70% (excluding VAT) from the CFLA. The supplier of the Training Services, on the other hand, invoiced the Association for the full amount (100%), plus VAT.

20The Association appears to have paid the VAT included on its invoices and, in return, to have deducted the VAT included on the invoices of the undertakings that supplied the Training Services from its tax liability as input tax. Based on the structure of the MSE Project, that must have resulted in excess VAT on the part of the Association (VAT on 30% less [input] VAT on 100%).

21During an audit, the tax administration adopted a total of eight decisions in 2019 and 2021, pursuant to which it issued the Association, for the period from January to October 2018, with a notice of additional assessment in respect of VAT in the amount of EUR 87 299.37, plus default interest of EUR 7 707.52 and a fine of EUR 611.96. At the same time, it also refused to reimburse the overpaid VAT (this presumably means the remuneration in the context of the deduction of input tax) for the months of July, September, October, November and December 2018 and the months of February, March, May and December 2019 in the total amount of EUR 101 363.24.

22The tax administration stated in its decisions that, in accordance with Decrees No 617 and No 365 of the Council of Ministers, the projects could be carried out by an association or an administrative authority but not by an undertaking. In its view, since the Association was created to achieve the objectives set out in its statutes, which are not characterised by a profit-making purpose, and since, also, it was not envisaged that any profit would be made from the implementation of the projects, those projects were not carried out as part of the Association’s economic activity. According to the tax administration, in practice, the Association dealt with project management and administered the flow of aid payments from EU funds. The Association itself did not supply Training Services; this was done by undertakings that were contractually linked to it. Accordingly, in its view, the Association is not entitled to deduct the input tax.

23In contrast, the Association submitted that its status as an association does not affect its right to deduct input tax. It states that it is registered as a taxable person liable for VAT and, while implementing the projects, it supplied Training Services. It maintains that training is a transaction subject to VAT. Accordingly, it was required to issue tax invoices and, consequently, it is entitled to deduct the input tax.

24The action brought by the Association against the decisions was upheld by judgments of the Administratīvā rajona tiesa (District Administrative Court, Latvia). The tax administration appealed against those judgments.

IV. Preliminary ruling proceedings

25All the cases were joined in a single set of proceedings before the Administratīvā apgabaltiesa (Regional Administrative Court, Latvia). That court stayed the proceedings and referred the following questions to the Court of Justice for a preliminary ruling under Article 267 TFEU:

Must Article 9(1) of the VAT Directive be interpreted as meaning that a not-for-profit organisation whose activity is aimed at implementing State aid schemes financed by the European Regional Development Fund is to be treated as a taxable person who carries out an economic activity?

Must Article 28 of the VAT Directive be interpreted as meaning that an association which does not actually supply training services is nevertheless to be equated with a supplier of services where the services were acquired from another economic operator in order to ensure the implementation of a State aid project financed by the European Regional Development Fund?

If a supplier of services receives only partial consideration from the recipient of the service for the service supplied (30%) but the remaining cost of the service is covered by an aid payment from the European Regional Development Fund, is the taxable consideration within the meaning of Article 73 of the VAT Directive the total amount received by the supplier of services from both the recipient of the service and a third party in the form of an aid payment?’

26In the proceedings before the Court of Justice, written observations were submitted by the Association, Latvia and the European Commission. In accordance with Article 76(2) of the Rules of Procedure, the Court did not consider it necessary to hold a hearing.

V. Legal assessment

A. The questions referred

27In the proceedings before the national court, the Association objects to the refusal to allow the deduction of the input VAT paid on the invoices sent to it by the undertakings that provided the Training Services. The deduction provided for in Article 168(a) of the VAT Directive presupposes, inter alia, that the Association is a taxable person and that the services in respect of which VAT has been paid to another taxable person were used for the purposes of its taxed transactions.

28In that regard, it must be determined who supplied which services for consideration to whom and who received which services for consideration from whom. That is, in essence, what the referring court asks with its second question, which is based on Article 2(1)(c) of the VAT Directive taking into account Article 28 of that directive. Therefore, the second question will be answered first (see B). The third question can be answered and clarified along with it at the same time, that is to say, whether the subsidies from the CFLA, which are financed by the ERDF, should also be included in the taxable amount for the services under the two projects, for which the Association invoiced the recipient of the Training Service (see B.1.c and B.2.c.). If the Association supplied services to another person, then this must have been in the context of an economic activity (Article 9(1) of the VAT Directive) in order to be deemed to be a taxable person (see C).

29In that context, the referring court starts from the implicit premiss that the Training Services – should they be taxable – are also liable for tax and the exemption under Article 132(1)(i) of the VAT Directive (which also covers vocational training and retraining) and its corresponding implementation in national law are not relevant. In the absence of factual information, that cannot be assessed in the present case. My analysis is therefore also based on that premiss.

B. Identifying the supplier and the recipient of the supply of services and the taxable amount (Questions 2 and 3)

30The aim of VAT, as a general tax on consumption, is to impose a tax on consumer capacity, which is demonstrated by consumers’ expenditure of assets to procure a consumable benefit. ⁵ Therefore, the recipient of the service must have received a consumable benefit. This applies both to a supply of goods and to a supply of services within the meaning of Article 2(1)(a) and (c) of the VAT Directive. The consumable benefit under consideration in the present case is the provision of training. Training is not a supply of goods within the meaning of Article 14 of the VAT Directive and is therefore a supply of services within the meaning of Article 24(1) of that directive.

31However, it is necessary to determine who supplied that service (training) to whom. This raises the question of how the supplier and the recipient of the service are to be identified when several persons are involved in the provision of a ‘service for consideration’ within the meaning of Article 2(1)(c) of the VAT Directive. In this respect, a distinction must be drawn between the two different projects (ICT and MSE).

1. Supply relationships under the ICT Project

(a) Ways to identify the supplier and the recipient of the service

32Since the purpose of VAT is to tax the recipient’s expenditure on consumer goods, identifying the recipient of the service can, in principle, be based on the person who paid for the service. This is because the latter bears the corresponding costs on account of the fact that for him or her the service represents a consumable benefit received by him or her. Normally, it is clear who the recipient of the service is from the contractual provisions.

33Thus the Court explicitly stated that in order to identify the recipient of the taxable supply, it is necessary to determine who was linked by a legal relationship in the course of which there is reciprocal performance. ⁶ Such a legal relationship is assumed by the Court if there is a sufficiently direct link between the service supplied and the consideration received. ⁷ In this regard, in so far as the contractual position normally reflects the economic and commercial reality of the transactions, the relevant contractual terms constitute a factor to be taken into consideration. ⁸

34However, the flow of payments is only an indicator. This is because for a supply of services to be deemed to be ‘for consideration’, within the meaning of the VAT Directive, as is also apparent from Article 73 thereof, it is not a requirement that the consideration be obtained directly from the recipient of that supply, since it may be obtained from a third party. ⁹ Therefore if the trainee has paid for only a proportion of the training service and a third party has paid for the rest, that does not exclude the assumption that a service was provided to the trainee.

35In the present case (ICT Project) the trainee first paid the Association for the course in full. The CFLA then paid aid to the Association, which transferred it to the trainee. In that scenario the trainee is the recipient of the supply of the service. In addition, the Association concluded a contract with a training service supplier (trainer) and paid the latter for its service. To that extent, the Association is the recipient of the supply of that service.

36Since the trader acts as tax collector on behalf of the State under VAT law, ¹⁰ it is the person who received the consideration who must generally be used to identify the supplier. This is because only this person can pay the VAT included in the consideration to the State. Normally, this also follows from the contractual provisions. In that regard, two suppliers are also conceivable in the present case. First, the trainer concluded a contract with the Association and received consideration from the latter for its service. Secondly, the Association concluded a contract with the trainee and received consideration from the latter for the Training Service.

37Contrary to the view expressed by the tax administration, the fact that the Association did not provide the Training Service itself, i.e. not with its own staff, but instead appointed an independent third party to do so, is immaterial. Employing a subcontractor is entirely normal in the business world and involves the subcontractor providing a service to a client, which then provides said service to its customers as its own service. This has already been clarified by the Court of Justice. ¹¹

38The decisive factor is that the subcontractor (here, the trainer) provided its Training Service to the trainee not in its own name, but in (here, under) the name of a third party (i.e. in the name of the Association) vis-à-vis the trainee. There are consequently two services under the ICT Project. First, the trainer supplies a service to the Association and secondly, the Association supplies a service to the trainee, who pays for it in full. The administration fee additionally charged by the Association is the Association’s ‘profit margin’ in respect of the Training Service purchased from the supplier of the service.

(b) Distinction from a transaction (service) on a commission basis

39The ways to identify the supplier and the recipient of the service set out above are always relevant when persons act in their own name (on their own behalf). If someone acts in the name of another person (on behalf of a third party), that is a case of representation in which the legal consequences affect the principal. This includes both legal representation under a power of attorney and using a subcontractor acting under a third party’s name. Therefore, in the present case (ICT Project), the Training Services of the trainer are attributed to the Association.

40Article 28 of the VAT Directive is not relevant in the context of the ICT Project, since that article provides for a supplier acting in his [or her] own name on behalf of another person. ¹² That is not the case here, since the Training Services are supplied by the Association in its own name and on its own behalf. A principal (commissioning party) on whose behalf the services are purchased or sold cannot be identified in the present case.

(c) Amount of the consideration

41Identifying the amount of the consideration for the ICT Project is also straightforward, since the expenditure of the recipient of the Training Service vis-à-vis the Association is as definite as the expenditure of the Association vis-à-vis the supplier of that service. The aid subsequently paid by the CFLA to the Association, which is then transferred to the trainee, does not alter the amount of the consideration for both services, but simply reduces the economic burden on the trainee. Therefore, the payment and transfer of the aid from the CFLA to the trainee via the Association does not have an impact on the Association’s tax liability and deduction of input tax.

2. Supply relationships under the MSE Project

(a) Ways to identify the supplier and the recipient of the service

42Identifying the supplier and the recipient of the service under the MSE Project is a bit more complicated. In this case, there is a contract between the Association and the trainer for the provision of a Training Service to a trainee, paid for by the Association. In addition, there is a tripartite contract between the Association, the trainer and the trainee, under which the trainee contributes 30% of the costs. However, the content of that contract is not clear. According to the explanatory outline in the request for a preliminary ruling, the trainer was to have invoiced the trainee for 30% of the costs of its service. The third question and the explanations relating thereto, on the other hand, indicate that the Association invoiced the trainee for 30% of the costs of the Training Service, while claiming the deduction of input tax on the trainer’s invoice (100%). It will therefore be assumed hereinafter that the trainer issued an invoice to the Association for the Training Services (100%), which the Association paid from the funds it received from the trainee (30%) and the CFLA (70%).

43The difference from the situation in the ICT Project lies in the fact that the Association may not have acted vis-à-vis the trainee as the supplier of the Training Service in its own name, but merely as the organiser of the implementation of the training project. It is therefore conceivable that the Association does not provide a Training Service to the trainee, but only a business supply service (organisation of subsidised training), whereas the trainer does provide a training service to the Association. However, it is also conceivable that, similarly to the ICT Project, the trainer provides the Training Services to the trainee in the name (or under the name) of the Association. In that case, the statements set out above apply mutatis mutandis. It is ultimately for the referring court to assess the specific contractual arrangements.

44Assuming that the contract in question is one under which the Association merely organises the subsidised training in its own name, then the starting point of the tax administration and the referring court is correct, that is to say, that the Association does not provide Training Services, but a business supply service. In that case, however, Article 28 of the VAT Directive could influence identifying the recipient of the service and the content of the service.

(b) The existence of a transaction on a commission basis

45Article 28 of the VAT Directive clarifies that ‘where a taxable person acting in his own name but on behalf of another person takes part in a supply of services, he shall be deemed to have received and supplied those services himself’. This provision covers the cases where a commission agent both purchases and sells a service in his or her own name on behalf of another person.

46These VAT obligations relating to transactions for commission are a legal fiction, as the Court has rightly emphasised in settled case-law. ¹³ Under that fiction, the operator, who takes part in the supply of services and who constitutes the commission agent, is considered to have, first, received the services in question from the operator on behalf of whom it acts, who constitutes the principal, before providing, secondly, those services to the client himself or herself. ¹⁴

47Consequently, if the Association, as a commission agent, were to have sold the Training Services to the trainee in its own name but on behalf of the trainer (sales commission), then the fiction of Article 28 of the VAT Directive would mean that, instead of a business supply to the trainer, the Association provides a Training Service to the trainee, namely the one that it previously received from the trainer. Therefore the direction of the supply and the subject matter of the supply change.

48If, on the other hand, the Association, as a commission agent, were to have purchased the Training Services in its own name but on behalf of the trainee (purchasing commission), then the fiction of Article 28 of the VAT Directive would mean that, instead of a business supply to the trainee, a service is accepted that was previously received from the trainer. In that case only the subject matter of the supply changes.

49Actually, the commission agent’s activity is a mere business supply service, for which it receives a commission. However, this business supply service is reclassified for VAT purposes so that it is treated as the service to be supplied (principal service). This is particularly crucial with regard to tax exemptions; ¹⁵ these are thereby extended also to cover the commission agent’s business supply service. This means that under that fiction direct transactions and transactions on a commission basis are treated in the same way.

50However, it follows from Article 28 of the VAT Directive that there must be an agency in performance of which the commission agent acts, on behalf of the principal, in the supply of services. ¹⁶ There must therefore be an agreement between the commission agent and the principal ¹⁷ for the purpose of granting the agency concerned. This is why the term ‘principal’ is also used to define the commissioning party in some legal systems. Neither of the aforementioned requirements is excluded in the present case, it being understood that it is for the referring court to establish the existence of such a commission contract.

(c) Amount of the consideration

51Identifying the consideration in the context of the MSE Project, on the other hand, is less problematic. It is correct that the trainee bears only 30% of the costs borne by the Association itself for the purchased Training Service. Even though the Association issued only one invoice for that 30% and paid VAT only on that basis, Article 73 of the VAT Directive clarifies that the taxable amount includes everything received by the supplier from the customer (here, 30% from the trainee) ‘or a third party’. In addition, Article 73 of the VAT Directive also clarifies that this includes subsidies directly linked to the price of the supply.

52If the payment by the third party (here, the CFLA) relates to a specific service for a specific customer (here, the trainee), then that amount is indisputably included in the taxable amount for the service. ¹⁸

53That – as the European Commission and Latvia both agree – appears to be the case here. The aid paid by the CFLA to the Association, which remains with the Association, if and because it provided a corresponding service to the trainee, is directly related to a specific Training Service. It is thus part of the consideration for the service provided to the trainee and is therefore also included in the taxable amount. Consequently, in the present case (in the context of the MSE Project) that payment also has an impact on the Association’s tax liability.

3. Interim conclusion

54Article 2(1)(c) of the VAT Directive does not require the supplier to provide the service in person. He or she may also use an independent third party as a subcontractor who performs the service in or under his or her name. If there is a contract under which a service is purchased or sold in his or her own name but on behalf of a third party, Article 28 of the VAT Directive applies. That changes the subject matter of the supply and, in the case of sales commission, also the direction of the supply. In that regard, the subsidies that a fund pays to the service provider for a specific service are, under Article 73 of the VAT Directive, included in the taxable amount as payment by a third party, which the supplier receives for that service.

C. Concept of ‘economic activity’ within the meaning of Article 9 of the VAT Directive (Question 1)

55In order for the Association, which, as a non-profit association, is not permitted to make a profit, to be treated as a taxable person, it must have carried out an economic activity by means of its Training Services in the context of both projects. Only then could it be entitled to deduct input tax. Under the second subparagraph of Article 9(1) of the VAT Directive the concept of ‘economic activity’ covers any activity of producers, traders or persons supplying services, including mining and agricultural activities and activities of the professions.

56It is apparent from the Court’s case-law that that definition shows that the scope of the concept of ‘economic activity’ is very wide and that the term is objective in character, in the sense that the activity is considered per se and without regard to its purpose or results. ¹⁹ Furthermore, it also follows from the Court’s case-law that, in order to determine whether a service is supplied in return for remuneration, such that the activity in question is to be classified as an economic activity, all the circumstances in which it is supplied have to be examined. ²⁰

57This is confirmed by the wording of Article 9(1) of the VAT Directive. It delineates the economic activity that leads to a person being considered as a taxable person, listing various specific jobs and ‘the professions’ whose activities are regarded as ‘economic activity’.

1. A typological approach

58Given the difficulty of precisely defining ‘economic activity’, it is understandable that the VAT Directive, by its description of the necessary economic activity with typical occupational images (‘producers, traders or persons supplying services’ or ‘mining and agricultural activities and activities of the professions’), helps to give concrete expression to the concept of a taxable person and the economic activity necessary to qualify as such.

59In contrast to an abstract definition, a typological description is more open. ²¹ Whether a particular thing belongs to the type does not have to be determined by logical/abstract subsumption, but can be determined according to the degree of similarity to the prototype (pattern). That comparison demands an overall assessment in each individual case, taking into account the generally accepted standards.

60In that regard, according to the case-law of the Court, the question of whether the amount was determined on the basis of criteria which ensured that it was sufficient to cover the operating costs of the provider of the service may be a relevant factor. ²² This also applies to the amount of earnings and other factors, such as the number of customers. ²³ The mere circumstance that each supply of services, considered individually, is not remunerated at a level corresponding to the costs incurred is not sufficient to show that the activity as a whole is not remunerated on the basis of criteria ensuring that the operating costs of the provider of the service are covered. ²⁴ If the contributions paid by the recipients of the services cover only a small part of the total operating costs incurred by the provider, however, this militates against an economic activity. ²⁵

61The Court has developed this typological approach more recently, for example in the Court’s decision regarding the economic activity of a supervisory board member. Economic activity was denied because the position of a member of the supervisory board in the specific case, unlike that of a taxpayer, was characterised by the absence of any economic risk arising from the activity carried out. The member of the supervisory board in question did not ‘unlike an entrepreneur … have a significant influence over his revenue or his expenditure’. ²⁶

62This approach was recently made very clear in the two decisions Gmina O. and Gmina L. In those cases the Court rightly stated that, given the difficulty of establishing a precise definition of ‘economic activity’, all the circumstances in which it is supplied have to be examined by making a case-by-case assessment, referring to the ‘typical conduct’ of an active entrepreneur in the field concerned. ²⁷

2. The absence of profit-making objectives

63As I have already stated previously, ²⁸ this approach seems to me to be the only manageable approach for deciding, in borderline cases, whether or not the person concerned is carrying out an economic activity. However, this approach is not based on a single criterion, such as the absence of cost recovery or a short-term, or even one-off, activity. A company which makes losses for a number of years (whether for strategic reasons or because of an unfavourable market environment) indisputably remains a taxable person. This applies equally to a company which engages in economic activity through a single transaction (so-called project companies) and in so doing earns significant revenue.

64The duration of the activity is only one of many aspects. The same is true of failure to cover the costs when calculating the price. The last point is often overlooked. However, it follows from the very wording of Article 9(1) of the VAT Directive that a profit-making purpose is irrelevant. This is because under that provision ‘taxable person’ means any person who, independently, carries out any economic activity whatever the results of that activity.

65It follows that it is completely immaterial if an association is not permitted to make a profit under national non-profit law in a specific case. That does not exclude economic activity. The same applies to other loss-making activities, even long-term loss-making activities, which are more common for non-profit organisations.

66This is confirmed by Article 98(2) in conjunction with point 15 of Annex III to the VAT Directive in the version then in force ²⁹ and in the version currently in force. ³⁰ Under that provision, Member States may grant a reduced rate of VAT for services provided by non-profit organisations. Given that the absence of profit-making objectives is an essential characteristic of non-profit status, the legislature apparently considered that such organisations can also be economically active. Otherwise it would make no sense to provide for a reduced rate of VAT for those transactions. In line with the view taken by the European Commission, the absence of profit-making objectives – and the same applies to the absence of cost recovery – does not in itself exclude the person concerned from being economically active and therefore from being regarded as a taxable person.

3. Comparison of the manner in which the activity is carried out

67If, however, the results and purpose of an economic activity are not decisive factors, then the manner in which the activity concerned is carried out is the decisive criterion. Upon a comparative assessment within the framework of a typological approach it matters less whether comparable prices to those of typical undertakings are charged, but whether the activity (in particular the manner of its performance) is carried out in a way that is comparable to a typical professional category with which it is competing in that regard. The pricing method says little about this and may at most be regarded as one of many aspects.

68An organisation that organises a cake sale once a year with cakes baked by its members is hardly a taxable person for the purposes of VAT law. The situation is different if an association has its own bakery and organises a cake sale every week. This is because in the latter case the activity of the association (with or without the intention of making a profit) is comparable to that of a normal cake seller.

69In the present case, if one now considers the Association’s activity as a whole and compares it with a typical taxable person in a comparable situation (here, a typical undertaking that organises or provides training services), there are more similarities than differences.

70Thus, the association is developing its own activity (initiative) in order to implement the training projects supported by the CFLA. It bids for project ownership, seeks corresponding training companies, from which it purchases Training Services and finds suitable trainees, who pay for those services (at least proportionally). Whether they pay the full price and whether it finds additional ‘customers’ depends on the quality of the training. Consequently, the Association bears a certain economic risk. The calculation of the costs appears to be aimed at general cost recovery, even though an administration fee is additionally charged in the ICT Project. The fact that this appears not to be the case in the MSE Project is immaterial in this regard, since at least the input costs are fully refunded. As I have stated, recovery of the actual costs is, in any event, only one of a number of indicators in the context of an overall assessment.

71The Association actively seeks projects, customers and subcontractors in line with its own criteria, and apparently also has its own staff (or staff hired from third parties) to organise its projects. It presents itself externally as a training service provider or recipient. It does so systematically in the marketplace and for consideration. Thus the Association competes with any other training service provider.

72Also, there is no uncertainty as to the funding, even taking the subsidisation by the ERDF into account. Even though 70% is paid by the ERDF and the CFLA, this is fixed in advance, whereby in some cases that amount is transferred to the beneficiary only after the subsidy has been received. This – as the Association also argues in detail in its written observations – is not even remotely comparable to the situation of the municipalities in the Gmina L. and Gmina O. ³¹ cases. Any typical taxable person would proceed in this manner or a comparable manner, leaving aside profit-making objectives. This, however, as stated above (point 63 et seq.), is not necessary in VAT law. Whether the supplier acts with or without the intention of making a profit is irrelevant to the taxation of the end consumer’s expenditure. According to a typological approach, in the present case the Association must be regarded as a taxable person under Article 9 of the VAT Directive.

73The tax administration’s objection, based on national law, that according to national decrees projects may be implemented only by an authority of the direct administration or an association, and, for that reason, economic activity is excluded, cannot alter that conclusion. First, an authority (or more precisely, the legal entity of the authority) may also carry out an economic activity, as is apparent from Article 13 of the VAT Directive. Secondly, national law cannot prescribe when an association that is economically active is to be regarded as a taxable person within the meaning of EU law and when it is not. Rather, that follows from the VAT Directive. Moreover, national law itself states that a non-profit association may also pursue an economic activity. Lastly, the legal form of the supplier cannot, in principle, have any impact on the taxation of the consumer. The latter’s expenditure – which is to be taxed – is largely independent of the legal form of the supplier.

4. Interim conclusion

74The second subparagraph of Article 9(1) of the VAT Directive must therefore be interpreted as requiring, in the context of an overall assessment, a comparison of the specific activity with that of a taxable person typical of the professional category in question (here, a provider of training services). The circumstances described above give rise to no doubts in the present case about the Association performing an independent economic activity.

VI. Conclusion

Conclusion

75I therefore propose that the Court answer the questions referred for a preliminary ruling from the Administratīvā apgabaltiesa (Regional Administrative Court, Latvia) as follows:

The second subparagraph of Article 9(1) of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax must be interpreted as requiring, in the context of an overall assessment, a comparison of the specific activity with that of a taxable person typical of the professional category in question (here, a provider of training services). The comparable manner of the provision of training services gives rise to no doubts in the case at hand about the performance of an independent economic activity.

Article 2(1)(c) of Directive 2006/112 does not require the supplier to provide the service in person. He or she may also use an independent third party as a subcontractor who performs the service in or under his or her name. If there is a contract under which a service is purchased or sold in his or her own name but on behalf of a third party, Article 28 of the VAT Directive applies, which changes the subject matter of the supply by the commission agent and, in the case of sales commission, also the direction of that supply.

The subsidies that a fund pays to particular service providers for a specific service are, under Article 73 of Directive 2006/112, included in the taxable amount as a payment by a third party which the supplier receives for that service.

¹ Original language: German.

² Judgments of 30 March 2023, Gmina L. (C‑616/21, EU:C:2023:280, paragraph 43), and Gmina O. (C‑612/21, EU:C:2023:279, paragraph 35).

³ Judgment of 21 December 2023, Administration de l’enregistrement, des domaines et de la TVA (Value added tax (VAT) – Member of a board of directors) (C‑288/22, EU:C:2023:1024, paragraphs 50 and 52 et seq., in which the board of directors was ultimately compared with a typical entrepreneur, who bears entrepreneurial risk and has entrepreneurial initiative); the judgment of 13 June 2019, IO (Value added tax (VAT) – Activities of a member of a supervisory board) (C‑420/18, EU:C:2019:490, paragraph 42), is clearer.

⁴ Council Directive of 28 November 2006 (OJ 2006 L 347, p. 1), in the version applicable to the years at issue, 2018 and 2019; last amended in that respect by Council Directive (EU) 2019/475 of 18 February 2019 (OJ 2019 L 83, p. 42).

⁵ 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 [VAT] 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’).

⁶ Judgment of 3 May 2012, Lebara (C‑520/10, EU:C:2012:264, paragraph 33); along similar lines, see also judgment of 16 September 2020, Valstybinė mokesčių inspekcija (Joint activity agreement) (C‑312/19, EU:C:2020:711, paragraph 40 et seq.).

⁷ Judgments of 20 January 2022, Apcoa Parking Danmark (C‑90/20, EU:C:2022:37, paragraph 27); of 16 September 2021, Balgarska natsionalna televizia (C‑21/20, EU:C:2021:743, paragraph 31); of 20 January 2021, Finanzamt Saarbrücken (C‑288/19, EU:C:2021:32, paragraph 29); and of 22 November 2018, MEO – Serviços de Comunicações e Multimédia (C‑295/17, EU:C:2018:942, paragraph 39).

⁸ Judgment of 18 June 2020, KrakVet Marek Batko (C‑276/18, EU:C:2020:485, paragraph 66); similarly, judgment of 20 June 2013, Newey (C‑653/11, EU:C:2013:409, paragraph 43).

⁹ Judgments of 15 April 2021, Administration de l’Enregistrement, des Domaines et de la TVA (C‑846/19, EU:C:2021:277, paragraph 40); of 27 March 2014, Le Rayon d’Or (C‑151/13, EU:C:2014:185, paragraph 34); and of 7 October 2010, Loyalty Management UK (C‑53/09 and C‑55/09, EU:C:2010:590, paragraph 56).

¹⁰ According to settled case-law of the Court of Justice, judgments of 11 November 2021, ELVOSPOL (C‑398/20, EU:C:2021:911, paragraph 31); of 15 October 2020, E. (VAT – Reduction of the taxable amount) (C‑335/19, EU:C:2020:829, paragraph 31); of 8 May 2019, A-PACK CZ (C‑127/18, EU:C:2019:377, paragraph 22); of 23 November 2017, Di Maura (C‑246/16, EU:C:2017:887, paragraph 23); of 13 March 2008, Securenta (C‑437/06, EU:C:2008:166, paragraph 25); and of 1 April 2004, Bockemühl (C‑90/02, EU:C:2004:206, paragraph 39).

¹¹ Judgment of 3 May 2012, Lebara (C‑520/10, EU:C:2012:264, paragraph 34 et seq.): A distributor of telephone cards provides a telecommunications service that has previously been procured for it by a telephone company (as a subcontractor). Likewise, judgments of 30 March 2023, Gmina L. (C‑616/21, EU:C:2023:280, paragraph 39), and Gmina O. (C‑612/21, EU:C:2023:279, paragraph 31).

¹² See, inter alia, the case-law of the Court of Justice, in so far as it has already addressed Article 28, judgments of 30 March 2023, Gmina L. (C‑616/21, EU:C:2023:280, paragraph 31 et seq.); of 4 May 2017, Commission v Luxembourg (C‑274/15, EU:C:2017:333, paragraph 85 et seq.); and of 14 July 2011, Henfling and Others (C‑464/10, EU:C:2011:489, paragraph 34 et seq.).

¹³ Judgments of 21 January 2021, UCMR – ADA (C‑501/19, EU:C:2021:50, paragraph 43); of 12 November 2020, ITH Comercial Timişoara (C‑734/19, EU:C:2020:919, paras 49 and 50); of 19 December 2019, Amărăşti Land Investment (C‑707/18, EU:C:2019:1136, paras 37 and 38); of 16 September 2020, Valstybinė mokesčių inspekcija (Joint activity agreement) (C‑312/19, EU:C:2020:711, paragraph 49); of 4 May 2017, Commission v Luxembourg (C‑274/15, EU:C:2017:333, paras 85, 86 and 88); and of 14 July 2011, Henfling and Others (C‑464/10, EU:C:2011:489, paragraph 35).

¹⁴ Judgments of 4 May 2017, Commission v Luxembourg (C‑274/15, EU:C:2017:333, paragraph 86), and of 14 July 2011, Henfling and Others (C‑464/10, EU:C:2011:489, paragraph 35).

¹⁵ See expressly judgment of 14 July 2011, Henfling and Others (C‑464/10, EU:C:2011:489, paragraph 36).

¹⁶ See judgment of 12 November 2020, ITH Comercial Timişoara (C‑734/19, EU:C:2020:919, paragraph 51).

¹⁷ Judgments of 30 March 2023, Gmina L. (C‑616/21, EU:C:2023:280, paragraph 32), of 12 November 2020, ITH Comercial Timişoara (C‑734/19, EU:C:2020:919, paragraph 52).

¹⁸ See also to that effect, Court of Justice, judgment of 13 June 2002, Keeping Newcastle Warm (C‑353/00, EU:C:2002:369, paragraph 23 et seq.).

¹⁹ Judgment of 15 April 2021, Administration de l’Enregistrement, des Domaines et de la TVA (C‑846/19, EU:C:2021:277, paragraph 47); similarly judgment of 25 February 2021, Gmina Wrocław (Transformation of the right of usufruct) (C‑604/19, EU:C:2021:132, paragraph 69); along similar lines, see also judgment of 16 September 2020, Valstybinė mokesčių inspekcija (Joint activity agreement) (C‑312/19, EU:C:2020:711, paragraph 39).

²⁰ Judgments of 15 April 2021, Administration de l’Enregistrement, des Domaines et de la TVA (C‑846/19, EU:C:2021:277, paragraph 48), and of 12 May 2016, Gemeente Borsele and Staatssecretaris van Financiën (C‑520/14, EU:C:2016:334, paragraph 29); see, to that effect, judgments of 19 July 2012, Rēdlihs (C‑263/11, EU:C:2012:497, paragraph 34), and of 26 September 1996, Enkler (C‑230/94, EU:C:1996:352, paragraph 27).

²¹ For greater detail, see my Opinion in Posnania Investment (C‑36/16, EU:C:2017:134, point 25).

²² Judgment of 15 April 2021, Administration de l’Enregistrement, des Domaines et de la TVA (C‑846/19, EU:C:2021:277, paragraph 49); see, to that effect, judgment of 22 February 2018, Nagyszénás Településszolgáltatási Nonprofit Kft. (C‑182/17, EU:C:2018:91, paragraph 38 and the case-law cited).

²³ Judgment of 15 April 2021, Administration de l’Enregistrement, des Domaines et de la TVA (C‑846/19, EU:C:2021:277, paragraph 49); see, to that effect, judgments of 12 May 2016, Gemeente Borsele and Staatssecretaris van Financiën (C‑520/14, EU:C:2016:334, paragraph 31); of 19 July 2012, Rēdlihs (C‑263/11, EU:C:2012:497, paragraph 38); and of 26 September 1996, Enkler (C‑230/94, EU:C:1996:352, paragraph 29).

²⁴ Judgment of 15 April 2021, Administration de l’Enregistrement, des Domaines et de la TVA (C‑846/19, EU:C:2021:277, paragraph 51).

²⁵ Judgments of 12 May 2016, Gemeente Borsele and Staatssecretaris van Financiën (C‑520/14, EU:C:2016:334, paragraph 33), and of 29 October 2009, Commission v Finland (C‑246/08, EU:C:2009:671, paragraph 50). This is also emphasised in the judgment of 15 April 2021, Administration de l’Enregistrement, des Domaines et de la TVA (C‑846/19, EU:C:2021:277, paragraph 52).

²⁶ Judgment of 13 June 2019, IO (Value added tax (VAT) – Activities of a member of a supervisory board) (C‑420/18, EU:C:2019:490, paragraph 42).

²⁷ Judgments of 30 March 2023, Gmina L. (C‑616/21, EU:C:2023:280, paragraph 43), and Gmina O. (C‑612/21, EU:C:2023:279, paragraph 35), both citing judgment of 12 May 2016, Gemeente Borsele and Staatssecretaris van Financiën (C‑520/14, EU:C:2016:334, paragraph 29).

²⁸ See my Opinion in Administration de l’Enregistrement, des Domaines et de la TVA (VAT – Member of a board of directors) (C‑288/22, EU:C:2023:590, point 22); Gmina O. (C‑612/21, EU:C:2022:874, point 48 et seq.); Gmina L. (C‑616/21, EU:C:2022:875, point 63 et seq.); and Posnania Investment (C‑36/16, EU:C:2017:134, point 25).

²⁹ Until it was amended in April 2022, point 15 of Annex III read: ‘ supply of goods and services by organisations recognised as being devoted to social wellbeing by Member States and engaged in welfare or social security work, in so far as those transactions are not exempt pursuant to Articles 132, 135 and 136’.

³⁰ Point 15 of Annex III currently reads: ‘supply of goods and services by organisations engaged in welfare or social security work as defined by Member States and recognised as being devoted to social wellbeing by Member States, in so far as those transactions are not exempt pursuant to Articles 132, 135 and 136’.

³¹ Judgments of 30 March 2023, Gmina L. (C‑616/21, EU:C:2023:280), and Gmina O. (C‑612/21, EU:C:2023:279).