The dispute concerned the obligation to determine the input tax on the basis of proportions provided in Article 86 section 2a of the VAT Act, in the wording in force as from 1 January 2016.

The question was asked by a regional broadcaster - a public radio station. They explained that their activities involved a number of activities, including: provision against payment of services exempted from VAT under Article 43 section 1 item 34, provision against payment of advertising services taxed with 23% VAT, and provision against payment of services exempted from VAT due to the fact that they are provided abroad. They asked whether, beginning from 1 January 2016, they would be required to determine the input tax for deduction in compliance with the so-called pre-ratio under Article 86 section 2a of the VAT Act.

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Expert’s comment

Marta Ignasiak, tax consultant at FKA Furtek Komosa Aleksandrowicz:

The principal problem of the broadcaster is to determine the relationship between expenses on mission implementation and the business activity they conduct. The issue was substantially resolved by CJEU based on the sixth directive in the case no. C-11/15 Odvolaci finančni ředitelstvi, which judgement was also invoked by the court ruling in this case. According to the Court, public broadcasting activities that are financed from obligatory statutory charges (subscription fee) cannot be treated as provision of services against payment while payment is the only criterion based on which VAT taxation may be imposed on a service. As a result, the broadcaster’s activities in this respect are beyond the scope of the VAT Act. This position is not new and has already been presented in certain judgements of domestic courts, among others in the judgement of the Provincial Court of Administration (WSA) in Olsztyn dated 5 November 2008, I SA/Ol 424/08.

The second issue the broadcaster must deal with is the necessity to settle the VAT on acquisitions relating to mission implementation using the so-called pre-ratio. For a long time, the VAT Act provided no basis for activities which are not subject to VAT taxation to have any impact on the scope of the right to deduct using the turnover ratio (cf. resolution of 7 judges of the Supreme Court of Administration [NSA] dated 24 October 2011, I FPS 9/10). However, this changed with the introduction of Article 86 section 2a of the VAT Act, which remains in compliance with CJEU’s position permitting to deduct input tax only in the scope in which expenses may be allocated to the tax payer’s business activity (cf. C-437/06 Securenta Göttinger).

Therefore, an unfavourable resolution of the matter is substantially a direct consequence of CJEU’s classification and it would be difficult to find arguments to challenge it. Expenses which cannot be directly allocated either to activities exempted from VAT taxation (financed from subscription fees) or to activities subject to VAT or exempted activities financed as part of business activities should therefore be settled by means of the pre-ratio. It is worth noting that an analogous position may be found in numerous rulings of domestic courts, e.g. in judgements of: WSA in Rzeszow dated 7 April 2016. (I SA/Rz 133/16), WSA in Szczecin dated 7 April 2016 (I SA/Sz 137/16), WSA in Krakow dated 5 April 2016 (I SA/Kr 224/16), WSA in Olsztyn dated 24 March 2016 (I SA/Ol 60/16), WSA in Gdansk dated 20 April 2016 (I SA/Gd 285/16).

Edited by: Aleksandra Tarka (RP)