On 20 September 2017, the Court of Justice of the European Union rendered a judgement within the framework of a preliminary ruling procedure requested by the High Court of Justice of Castilla–La Mancha, declaring the “levy on wind power” as compatible with European Directives.
By way of introduction, we must point out that the levy on wind power established by Law 9/2011 of 21 March, considers as a taxable event the generation of adverse conditions and impacts on the natural environment and over the territory, as a result of the installation of wind turbines on wind farms intended for the production of electricity and located in the Autonomous Community of Castilla-La Mancha. This Law considers as responsible for payment of the aforementioned levy those individuals or companies operating the wind farm or, as the case may be, the holder of the relevant administrative authorization for the installation of the same. Its taxable base is constituted by the total amount of wind turbines existing on a wind farm located within the Autonomous Community of Castilla-La Mancha and its tax rate is determined by the application to the taxable base of various types of quarterly levies that vary depending on the number of wind turbines that make up the wind farm -when the wind farm has more than 15 wind turbines this levy will depend on the installed capacity-.
On considering such levy as unconstitutional and contrary to EU law, the companies Elecdey Carcelen, S.A., Energías Eólicas de Cuenca, S.A., Iberenova Promociones, S.A.U. and Iberdrola Renovables Castilla La Mancha, S.A, lodged various contentious administrative appeals before the High Court of Justice of Castilla-La Mancha (“HCJ“), against the refusals of their requests for an adjustment of the self-assessments made for the levy on wind power corresponding to years 2011 and 2012, as well as the refund of the amounts paid under that concept.
Within the framework of the abovementioned contentious administrative appeals, the HCJ submitted to the Court of Justice of the European Union (“CJEU“), various preliminary rulings on the compatibility of the levy on wind power with the European Directives relating to (i) the promoting of energy from renewable sources (“Directive 2009/28 of 23 April”), (ii) the Community framework for the taxation of energy products and electricity (“Directive 2003/96 of 27 October) and (iii) the arrangements for excise duty (“Directive 2008/118 of 16 December”).
A decision has been made on the aforementioned preliminary rulings by the CJEU in its Judgement of 20 September 2017, concluding that the levy on wind power is not incompatible with the aforesaid Directives on the following basis:
- Firstly, the Judgment provides a response to the preliminary rule over whether the interpretation of Directive 2009/28 opposes Law 9/2011 by establishing the payment of a levy on wind power related to electricity production.
In this sense, the Court appoints that in order to fulfil the target for the share of energy from renewable resources (20% for 2020), according to Directive 2009/28, Member States “may” adopt measures or “support schemes’” and, in particular, grant investment assistance, exemptions or tax deductions, tax returns, or even establish the obligation of using renewable energy. However, the Judgement considers that none of the alluded provisions of Directive 2009/28 precludes Member States from imposing a levy on wind turbines designed to produce electricity.
The Court continues by pointing out that as a result of the wording “may” (stated in Article 3.3 of Directive 2009/28), State Members are not obliged to apply “support schemes” to promote the use of renewable energy; the Court considers that, Member States have discretion as to the measures they consider appropriate to achieve the mandatory overall national targets.
Therefore, the CJEU considers that the possibility for Member States to adopt support schemes to promote the use of energy produced from renewable sources, where appropriate, in the form of tax exemptions or reductions, in no way implies that they would be prevented from taxing undertakings developing such energy sources, in particular wind turbines for the production of electricity.
- Moreover, the CJEU does not consider that a breach of Article 13 (1) (2) (e) of Directive 2009/28 has taken place, which provides that administrative fees paid by “consumers, planners, architects, builders and installers and suppliers of equipment and systems are transparent and proportional to their costs.” As indicated, this rule only limits the impact of costs for services carried out in administrative procedures on users and, therefore, does not prohibit Member States from establishing a levy, such as the levy at issue in the cases in the main proceedings. Secondly, and in relation to the interpretation of Directive 2003/96, the CJEU considers that the levy on wind power does not fall under the scope of Directive 2003/96, since it is not settled according to the energy generated but consists of a quarterly fixed amount which is determined according to the number of wind turbines installed on the wind farm or, if applicable, it is based on the capacity of the same (applicable to wind farms with more than 15 wind turbines). Consequently, the CJEU determines that there is no link between the taxable event of the wind power tax and the actual production of electricity by the wind turbines and, even less so, the consumption of electricity produced by them.
- Thirdly, the Court refers to the interpretation of Directive 2008/118 on excise duties, stating that the levy on wind power does not tax energy products or electricity in the manner stated in Directive 2003/96. Therefore, the issue on determining whether the objective of the levy is to protect the environment, as alleged by the Spanish Government and the Autonomous Community of Castilla-La Mancha, is to be restricted to the scope of national Law.
In conclusion, the CJEU interprets, on the one hand, that the royalty imposed by Castilla–La Mancha has no impact on the effective production of electricity by wind turbines nor does it have an effect on final customers and, in addition, it considers this levy to be compatible with the promotion of electricity from renewable sources with the Spanish target of 20% of share of renewable energy for 2020.
Finally, it should be noted that the Constitutional Court, through Court Order 183/2016, of 15 November, declared inadmissible the exception of unconstitutionality regarding the levy on wind power by declaring its legality as it “was within the imposed limits of the current legislation for the creation of taxes by Autonomous Communities”. In this sense, the ruling of the Constitutional Court and the recent interpretation of the CJEU endorses the autonomic levy on wind turbines related to electricity production and, therefore, enables other Autonomous Communities to impose levies on renewable technology.