C-615/23 – P. S.A.

A subsidy granted retrospectively by a municipal budgetary body to a local public transport operator to offset its financial losses does not form part of the taxable amount for VAT purposes.

The main proceedings involve a Polish transport company providing local passenger transport services. The company’s revenue from ticket sales does not cover its operating costs; therefore, it receives an annual operating subsidy from the municipal budgetary body responsible for organising local public transport. This subsidy corresponds to the company’s negative financial result. The Polish tax authority classified this subsidy as a price supplement-type subsidy, qualifying it as a third-party consideration forming part of the taxable amount of the ticket sales for VAT purposes. The company challenged this determination in court. The lower administrative court upheld the company’s claim. However, the tax authority appealed to the Supreme Administrative Court, which referred the case to the Court of Justice of the European Union (CJEU) for a preliminary ruling.

In its judgment, the CJEU clarified that for a subsidy to form part of the taxable amount, it must be directly linked to the price of the goods or services concerned. According to the CJEU, such a direct link exists if the subsidy is paid specifically for the supply of an identified good or service, and if the subsidy results in a proportionate reduction of the price, such that the amount of the subsidy included in the price can be determined. These criteria are not met in the case of subsidies granted retrospectively and calculated on the basis of a negative financial outcome. Therefore, the municipal subsidy granted in the present case, which is intended solely to offset the transport company’s losses ex post, does not form part of the VAT taxable amount.

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