vPPA and a right to deduct input VAT

Due to a fact that financial transactions (usually CfD) on which vPPA contract are based are treated in Poland as financial transactions regarding derivatives an thus exempted from VAT, its conclusion may have an impact on input VAT deduction. It is so, because depending on a result of CfD, each party may be a supplier of VAT exempted services. On the other hand, by vPPA a buyer meets sustainability targets, cut carbon footprint, and contribute to renewable energy growth and investment. A buyer secures environmental attributes and renewable energy certificates (RECs) without directly purchasing the electricity from the renewable facility.

 

Due to an application of the exemption, tax authorities question a right to fully deduct input VAT by vPPA clients. In one of such cases, MDDP represented the Client before the administrative court. The court (case I SA/Po 388/23) overturned a tax ruling and confirmed MDDP’s position that:

• a taxable amount resulting from vPPA transactions for the ecommerce company may be treated as “incidental transactions” and thus do not restrict the right to deduct input VAT,
• input VAT arising form a purchase of renewable energy certificates should be wholly deductible as a general cost of economic activities.

Tax representative was Marek Przybylski (VAT).