Illegal energy extraction as a supply of goods for consideration – CJEU judgment

On April 27, 2023, the CJEU issued a judgment in Case C-677/21 (Fluvius Antwerpen vs. MX) concerning the VAT taxation of illegal consumption of electricity by an individual. In the case under review, the distribution system operator, after discovering the non-contractual consumption of energy, issued an invoice for the supply of electricity to the aforementioned individual containing VAT. The amount due on the invoice was calculated on the basis of the actual energy consumption of this person based on the metered meter.

The national court hearing the case decided to submit a preliminary question to the CJEU seeking to determine whether the non-contractual consumption of energy constitutes a supply of goods subject to VAT.

The CJEU noted that, in principle, no distinction should be made between legal and illegal transactions from the perspective of VAT consequences. Moreover, according to the CJEU, a direct link can be perceived between the illegally consumed electricity and the counter-service claimed by the operator, since the amount of energy consumed was determined in accordance with the reading of the meter located at the beneficiary’s address.

Consequently, the CJEU pointed out that the supply of electricity by the distribution network operator, even if it is unintentional and results from the unlawful act of a third party, constitutes a supply of goods for consideration that includes the transfer of the right to dispose of the goods.

The ruling in question should be important for Polish practice in this type of case (given, in particular, that Polish administrative courts have so far treated illegal energy consumption as an activity not subject to VAT).