Energy cooperatives and legal fiction in the Renewable Energy Sources Act
The provisions of the RES Act (Article 38da(4)) introduce a specific legal fiction, according to which electricity fed into the grid by a producer (a member of the cooperative) is deemed to be energy supplied by that producer to the energy cooperative. In tax law, the word ‘supply’ automatically brings to mind Article 5 of the VAT Act, which requires the taxation of the supply of goods for consideration. There is therefore a risk that a cooperative member – such as a company with a photovoltaic installation – would be required to issue a VAT invoice to the energy cooperative for the electricity produced, and the cooperative would then have to account for that VAT. Such an interpretation of the regulations would complicate an already complex accounting process, generating additional record-keeping and accounting obligations.
The model of cooperation between the energy cooperative and its members described in the application
The description of the case dealt with by the tax authority presented an operational model in which the members of the cooperative (entrepreneurs), rather than the cooperative itself, were the owners of the photovoltaic panels. The mechanism of cooperation between these entities was based on two simple principles:
- The cooperative did not sell energy – it served only to mathematically calculate the energy produced and consumed by all members (so-called quantitative balancing), without ever becoming the owner of that energy.
- Financial settlements took place outside the cooperative – All payments for invoices were made directly between the cooperative member and the external energy supplier. The cooperative did not act as an intermediary in the transfer of funds.
In this arrangement, the cooperative acted as a kind of ‘virtual clearing house’, rather than an intermediary that buys goods from its members in order to resell them at a higher price.
Position of the Director of the National Tax Information Service
In the interpretation issued, the Director of the National Tax Information Service confirmed the applicant’s position, ruling that the supply of energy to the grid by a cooperative member is not subject to VAT. The authority’s reasoning is based on two premises:
- For a supply of goods to occur for VAT purposes, there must be a transfer of the right to dispose of the goods as owner (Article 7(1) of the VAT Act). In the case of an energy cooperative, the entity does not physically hold the energy generated by a member. It cannot decide to whom to sell this energy or how to use it, as this process occurs automatically within the distribution network, and any surpluses are managed by the energy supplier, not the cooperative. The statutory fiction of the ‘supply’ of energy serves solely for calculation purposes within the discount system, and not for the transfer of economic control over the goods.
- An element of the definition of a sale for VAT purposes is consideration (Section 5(1)(1) of the VAT Act: the supply of goods for consideration within the territory of the country is subject to VAT). In the model in question, the cooperative member does not receive remuneration from the cooperative for the energy supplied. The absence of consideration (payment) means that this transaction does not meet the definition of a supply of goods for consideration.
Practical implications for energy cooperatives
For entities operating under this legal form, the interpretation in question has specific practical consequences. First and foremost, it entails a significant simplification of accounting: cooperative members who are energy producers are not required to document the supply of energy to the grid with VAT invoices issued to the cooperative.
However, one must bear in mind the other side of the coin. Since this transaction is not subject to VAT and is not documented by an invoice, the energy cooperative is not entitled to deduct input VAT. The entire transaction between the member and the cooperative is therefore VAT-neutral. Financial settlements (invoices for energy shortfalls or distribution charges) take place directly between the external energy supplier and the cooperative member.
This interpretation provides an important guideline regarding the interpretation of tax law for energy cooperatives. If you are planning to set up an energy cooperative, it is worth ensuring that the settlement model in contracts and regulations reflects the absence of authority and consideration, which will allow you to benefit from this favourable approach by the tax authorities regarding VAT.
A matter in energy or renewables law?
That is where most conversations with a lawyer begin. A consultation is paid, PLN 600 net. You pay for a real opinion: whether you have a legal problem, what you can do about it and roughly what it costs. It ties you to nothing further, and you do not need to know the law, that part is on us.
- 1 Talk
You tell us what is going on, in your own words.
- 2 What next
We tell you your options and what it costs.
- 3 We act
You give the go-ahead and the matter is ours.
The practice includes ongoing advice on administrative and tax law. He has extensive experience in handling judicial, administrative, tax and judicial-administrative proceedings concerning both individual clients and business entities, including that gained through many years of providing services to local government units and other units of the public finance sector.
View profile →
