VAT rate on utilities in the case of a lease agreement
Taxpayers renting premises for business purposes, in addition to paying the so-called rent, must also incur expenses related to the day-to-day use of the premises, such as the supply of water, electricity or garbage collection.
The issue of taxing rental with tax on goods and services does not cause major problems - the rental of non-residential premises is taxed at 23% VAT. However, the method of taxing the media related to the rented premises raises doubts.
The tenant is the subject of the media contract
If the tenant signs contracts directly with suppliers of particular utilities, they are taxed at the rate appropriate for a given type of service. For example, electricity is taxed at 23%, while water is taxed at 8% VAT. The user of the premises receives invoices for the services provided from utility suppliers in his name / company, regardless of the rent invoices received from the landlord.
Utility invoices based on the landlord's details
On the other hand, the situation is different when the tenant of the premises has no contracts signed with media suppliers - they are concluded directly with the owner of the premises. Very often, in such cases, the costs of utilities are included in the total rent price, or re-invoiced by the owner of the premises to the user. It all depends on the provisions of the contract concluded between the tenant and the landlord. In this agreement, the parties may determine the value of the rent, taking into account utility charges, the method of settling media charges, etc.
Media as a component of the main service - rental
If the landlord includes the costs of utilities in the total amount of the rent and includes them in one item on the invoice, these costs are taxed with the VAT rate applicable to the lease (as a rule, 23%). This is due to the fact that the main service in this case is rental, and the delivery of utilities, etc. is the so-called additional services - they are part of the basic service and therefore should not be artificially separated. Hence, taxpayers, in such cases, are not even required to list on invoices as separate items of additional services provided as part of the main service. However, it is not a mistake to show the rent and utility charges separately on the invoice. However, this does not change the fact that in this case the VAT rate applicable to rental services should be applied, as the fees for rent and media services constitute one comprehensive service. Thus, the whole is taxed at one rate - appropriate for the main service, i.e. in principle 23% VAT.
The confirmation of the above is the individual interpretation of the Director of the Tax Chamber in Katowice of January 17, 2012 (IBPP2 / 443-1186 / 11 / AB), which stated that “The expenses incurred by the tenant for electricity, gas, water and sewage are closely related to the rental service of the premises (they do not constitute a separate service separate from the rental service). Above The expenses are a benefit due to the landlord under the lease agreement, and not for the resale of utilities or the transfer to tenants of utility costs. Thus, they should be subject to taxation at the rate appropriate to the provided premises rental services (...) ”.
If, on the other hand, the landlords re-invoice (resell) the costs of utilities on the users of the premises - end buyers, then according to the judgment of the Provincial Administrative Court in Kraków of February 12, 2013 (I SA / Kr 1204/12), they have the right to apply the rates appropriate for the given premises. services. The judgment stated that “Re-invoicing is carried out using the tax rate specified in the VAT Act, e.g. the sale of water intake and municipal sewage disposal as well as waste disposal is taxed at a rate of 8%, and the sale of electricity and heat is taxed at a tax rate of 23%.
The principle is that individual services are treated separately, and services related to rental, such as utilities, are not "covered by the concept of rental", but only that in certain situations they may constitute services inextricably linked to rental and taxable under the same rules as the rental service. . The costs of energy and gas may be "re-invoiced" by the lessor on the terms set out in Art. 8 sec. 2a of the Act, so the tax rate appropriate for these supplies may apply to them (...) ”.
Media and lease agreement in the eyes of tax authorities and courts
From many individual interpretations, it can be concluded that the tax office usually takes the position that the rental service and services related to the supply of utilities are closely related and should be taxed with the same VAT rate - provided for the rental service.
A different opinion in this respect is presented by judgments and court decisions, e.g. the above-mentioned judgment of the Provincial Administrative Court (I SA / Kr 1204/12) or the judgment of the Supreme Administrative Court of 19 June 2013 (FSK 252/13) in which the court indicated that: "Resale" the supply of goods and the provision of services related to the provision of utilities cannot be considered as part of a uniform performance, which is the provision of lease. In a situation where the parties in the lease agreement separately regulate the issue of remuneration for the use of someone else's property (Article 659 § 1 of the Civil Code) from fees for other benefits on the part of the landlord, i.e. for the provision of utilities, the rent will not include fees for possible other benefits of the lessor to the lessee. "
Therefore, it should be stated that the issue of taxation of media related to the rented premises depends mainly on the provisions of the contract.If the issues of utility billing are not included in the lease agreement - the agreement does not cover both the provision of the lease and the supply of services, the utilities may be taxed at the appropriate rate. Another solution is for tenants to sign direct contracts with suppliers of particular utilities. In such cases, there is no doubt that the supply of utilities is not part of the main service - it is provided by another entity.