Edited by Davide Accorsi and Stefano Luigi Airaghi
In the case C-615/23, P. S.A., dated May 8, 2025, the Court of Justice of the European Union (CJEU) ruled that the compensation guaranteed by a local authority to an entity providing public transportation services at a controlled price set by the authority itself should not be considered as a VAT taxable base. This applies if the ticket price is not set in such a way as to decrease proportionally with the compensation paid.
The case concerns P. S.A., a company active in the passenger transport sector, which intends to enter into contracts for the provision of public transportation services as an operator. To this end, P. S.A. reaches an agreement with a local authority, which acts as the organizer of public transportation and sets the prices of the transportation tickets that P. S.A. will sell to its customers (i.e., public transport passengers). Given that the determined price would result in a financial loss for P. S.A., the contract stipulates that the local authority must compensate P. S.A. to ensure an adequate financial result.
In this context, the CJEU was called to judge whether such compensation constitutes a taxable base for VAT purposes.
Under Article 73 of Directive 2006/112/EC, for the supply of goods and services, the taxable base “includes everything that constitutes the consideration, whether paid or to be paid, to the supplier or service provider for such transactions by the buyer, the recipient or a third party, including subsidies directly linked to the price of such transactions“.
The CJEU clarifies that, in this case, the recipients of public transportation services are the users who purchase the tickets. The organizer who pays the compensation is not considered the recipient of the service but a “third party” within the meaning of Article 73.
Furthermore, the Court states that the subsidy must be specifically intended for the subsidized operator to supply a good or provide a specified service, and it is necessary to verify that the buyers of the good or the recipients of the service benefit from the subsidy granted to the beneficiary. In particular, the price that the buyer or recipient has to pay must be determined in such a way as to be reduced proportionally to the subsidy granted to the seller of the good or the service provider. The amount of the subsidy, moreover, should be determinable.
Based on the above, the CJEU considers that compensation as in the present case does not directly affect the price of the transportation services provided, as the purpose of such compensation is primarily to cover the losses related to such activity. In particular, it must be noted that this compensation is granted retroactively and is independent of the actual use of the transportation services, and therefore does not fall within the notion of “subsidies directly linked to the price” within the meaning of Article 73 of Directive 2006/112/EC.
This conclusion is not called into question by the fact that without such compensation, the price of transportation tickets would have to be higher for the service beneficiaries.
Finally, the CJEU clarifies that the compensation cannot even fall within the more general concept of “everything that constitutes the consideration” in the definition of the taxable base mentioned. In fact, in the present case, the compensation is calculated without considering the identity and number of service users, and therefore, it is not possible to establish a direct link between such compensation and the individual users.
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