On 19 January 2017, the Court of Justice of the European Union (the CJEU) ruled that the Irish government agency responsible for the construction of national roads (the NRA) does not have to collect and pay VAT on toll motorways. The judgment of the CJEU was also important for the General Directorate for National Roads and Motorways (GDDKiA), which analogously to its Irish counterpart collects motorway tolls. Representatives of the Polish government actively participated in the case before the CJUE, whereas Wierzbowski Eversheds Sutherland tax experts worked in this field with GDDKiA for several years.
The NRA (National Roads Authority) initially added VAT to the motorway tolls. Later, however, the NRA came to a conclusion that it should not deduct the tax, because it operates in this area as a public authority, so is not a taxpayer. Therefore, the NRA demanded a refund of the overpaid VAT. However, the local tax authorities refused.
The case came before the CJUE, which had to decide whether a significant distortion of competition took place, in the scenario where private entities alone have no opportunity to build a road and collect toll. The question of whether the activity of providing toll motorways is a distortion of competition in the light of the VAT directive, was crucial to the outcome of the case, namely whether the NRA is or is not subject to VAT.
The CJUE in its judgment of 19 January 2017 (case ref. C-344/15) ruled that the government agency does not collect tax for motorway travel. According to the CJUE one cannot talk about the distortion of competition that would exist if the activities of a public body actually threatened private companies. So there is no question of that, if private companies can only potentially enter a given market. And this is so in this case because the NRA would have to authorise them to collect toll - the CJUE stated. It stressed that the NRA bears the responsibility for national roads. By collecting tolls, it acts as a public authority, and should not be treated as a VAT payer.
The outcome of the case before the CJUE was also important for GDDKiA, which analogously to its Irish counterpart collects motorway tolls.