Local authorities, government and public bodies

PVD Article 13(1) states that:

“States, regional and local government authorities and other bodies governed by public law shall not be regarded as taxable persons in respect of the activities or transactions in which they engage as public authorities, even where they collect dues, fees, contributions or payments in connection with those activities or transactions. However, where they engage in such activities or transactions, they shall be regarded as taxable persons in respect of those activities or transactions where there treatment as non taxable persons would lead to significant distortion of competition. In any event, bodies governed by public law shall be regarded as taxable persons in respect of the activities listed in Annex 1 provided that theses activities arenot carried out on such a small scale as to be negligible.

(2) Member states may regard activities, exempt under Articles 132, 135, 136, 371, 374, to 377 and Article 378(2), Article 379(2), or Articles 380 to 390 engaged in by bodies governed by public law as activities in which those bodies engage as public authorities.”

VATGPB2100

The intended effect of Article 13(1) is that government and public bodies arenot treated as ‘taxable persons’ when they undertake certain activities or transactions and these activities or transactions aretreated as being outside the scope of VAT, unless this would significantly distort competition. A ‘taxable person’ under EU legislation is a person who, independently, carries out an economic activity whatever the purpose or result of that activity. See the S33 bodies ― overview guidance note for more information.