Commentary

V2.108 Central and local government

Part V2 Registration – deregistration

V2.108 Central and local government

Classes of taxable person

V2.108 Central and local government

EU legislation—central and local government as taxable persons

Directive 2006/112/EC provides that states, regional and local government authorities, and other bodies governed by public law are not treated as taxable persons in relation to an activity or transaction if three conditions are met1. This provision has direct effect2. The conditions are as follows:

  1.  

    •     the body carries on the activity, or makes the transaction, in its capacity as a public authority3

  2.  

    •     the activity or transaction does not lead to significant distortions of competition4

  3.  

    •     the activity does not fall within a specified class5

These conditions are considered in turn below.

For the treatment of statutory functions as business or otherwise, see V2.203A and V2.213.

The body carries on the activity, or makes the transaction, in its capacity as a public authority6

Two requirements must be fulfilled for the exemption to apply: the activities must be carried out by a body governed by public law; and they must be carried out by that body acting as a public authority. It follows that an activity carried on by a private individual is not excluded from the scope of VAT merely because it consists in the performance of acts falling within the prerogatives of a public authority (see Ayuntamiento de Sevilla7). Neither is an otherwise taxable activity carried out by a public authority excluded from the scope of VAT purely by virtue of being carried out by such a body (see Commission v Ireland8).

Member states are

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