Reduced VAT rate for energy supply to public bodies: clarification 'business use'

Supply of electricity and natural gas to public bodies: business use? 

 

Principle 

State, local and regional authorities as well as other public law bodies are in principle not regarded as businesses for the activities or operations they carry out as public authorities. As a result, the consumption of these bodies is in principle considered as non-business and the reduced VAT rate of 6% applies.  

 

Competitive distortion of some significance 

For the activities or operations carried out by these institutions in which treatment as a non-business would lead to significant distortions of competition, they do qualify as a business. Their consumption of electricity and natural gas therefore qualifies as business consumption. This concerns, for example, the operation of a rest home by the PCSW or the organisation of childcare by a municipality.  

The EUR 25,000.00 threshold used for VAT purposes to transactions that may lead to a significant distortion of competition does not apply here. Local authorities or public law bodies can then still be regarded as businesses. As a result, the VAT rate of 21% applies to the supply of electricity and natural gas used for heating purposes and heat through heat networks. If they conclude energy contracts that cover multiple operations/activities, it must be considered in each case whether the consumption is predominantly business or non-business.  

In concrete terms, the share of operations carried out as a public authority (non-business use) and the share of operations that may lead to significant distortion of competition, without applying a minimum threshold (business use), should be assessed per energy contract or per power connection point.  

 

Legal presumption of business use

When a company number is communicated to the energy supplier, there is a legal rebuttable presumption on the part of the energy supplier that the energy contract concerns a supply for business use, unless the consumer has explicitly notified the energy supplier that the contract is for a supply for predominantly non-business use by means of the following statement: 

"This contract is concluded for the purpose of a supply of natural gas used as heating fuel/electricity for predominantly non-business use within the meaning of Article 420, §5, of the Programme Law of 27 December 2004."

In principle, the declaration is made per contract. However, if one contract comprises several connection points (EAN), and if the predominant use per connection point is different, the energy supplier will only be able to make a split if this is also communicated in that way.

 

Contact  

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