Concept of supply of services for consideration

Several Hungarian non-profit companies were created in order to construct, and later operate, agricultural engineering works on land including public roads and private sections). The works were financed by public funds. It was provided for that the companies would then invoice the property owners a small operating fee in relation to the agricultural works for a period of eight years. It is noted that no precise indication was given by the Court as to the amount of the operating fee or of the financed works. The companies deducted all of the VAT incurred on the construction costs. The question was whether this activity constituted and economic activity, and if the operating fee could be held to be consideration for a supply of services. The Court responded in the affirmative in terms of principles, recommending however to be sure that the operating fee was indeed consideration for the provision of an operation service and that the transaction did not constitute an artificial arrangement carried out with the sole aim of obtaining a tax advantage.

This decision must be reconciled with the recent Gemeente Borsele case (C-520/14) concerning the performance by a locality of the transport of schoolchildren.

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