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ECJ/CJEU – C-211/18 – Decision -Idealmed III – VAT exemption for private hospital

Source Curia

Decision (only published in French and Portuguese)

1)      Article 132 (1) (b) of Council Directive 2006/112 / EC of 28 November 2006 on the common system of value added tax must be interpreted as meaning that the competent authorities of ‘a Member State may take into account, with a view to determining whether healthcare services provided by a private hospital establishment, which are of a general interest nature, are provided under social conditions comparable to those which apply to legal bodies public, within the meaning of the same provision, the fact that these services are provided under agreements concluded with public authorities of that Member State, at prices fixed by those agreements and the costs of which are partly borne by social security of that Member State.

2)       Article 391 of Directive 2006/112, read in conjunction with Article 377 thereof and the principles of legitimate expectations, legal certainty and fiscal neutrality, must be interpreted as meaning that it does not object to the exemption from value added tax from the provision of care provided by a private hospital establishment falling under Article 132 (1) (b) of that directive by reason of an amendment the conditions for the exercise of his activities which have occurred since he opted for the taxation system provided for by the national regulations of the Member State concerned, which provides for the obligation, for any taxable person making such a choice, to remain subject said regime for a certain period, when such a period has not yet expired.

Facts (simplified)

Idealmed III – Serviços de Saúde SA, a company incorporated under Portuguese law (‘Idealmed’), operates five profit-making medical centers. Idealmed requested to be subject to the normal VAT scheme, i.e. it did not want to apply the VAT exemption for medical activities.

Idealmed entered into a series of agreements with public institutions that are part of various health system subsystems for the provision of medical services at predetermined prices.

The Portuguese tax authorities concluded that the activities of Idealmed are covered by the VAT exemption, without being able to waive that exemption. They therefore decided to change the tax status of Idealmed on their own initiative from taxable to exempt, and they raised an assessment for wrongly deducted input VAT.

Idealmed did not agree with this.

The Tribunal Arbitral Tributário (Centro de Arbitragem Administrativa – CAAD) [Tax Tribunal (Center for Administrative Arbitration), Portugal] decided to refer the following questions to the European Court of Justice Court for a preliminary ruling:

‘Does Article 132 (1) (b) of the VAT Directive preclude a hospital owned by a private-law commercial company which has entered into healthcare services agreements with the State and with legal persons governed by public law?’

Considerations

According to the AG, taxes are something that everyone usually tries to avoid as much as possible, even though they are one of the two things that are certain in life besides death – a well-known saying. Surprisingly, however, there are situations where taxation is seen as a positive and even desirable thing. This is, among other things, the case for companies that carry out activities that are subject to value added tax (VAT).

As long as such an activity is taxed, this taxation is neutral for the taxpayer, since its economic burden passes to the next stages of trade and is ultimately borne by the consumer. However, if the transactions carried out by the taxable person are exempt from VAT, he bears the economic burden of the tax paid at the earlier stages of trade. Therefore, companies often prefer to submit to taxation rather than opting for exemption.

However, if the exemption is mandatory, this possibility does not exist: it is not possible to abandon it and voluntarily submit to taxation. In the present case, the Court has the opportunity to recall that principle.

Decision 

1)      Article 132 (1) (b) of Council Directive 2006/112 / EC of 28 November 2006 on the common system of value added tax must be interpreted as meaning that the competent authorities of ‘a Member State may take into account, with a view to determining whether healthcare services provided by a private hospital establishment, which are of a general interest nature, are provided under social conditions comparable to those which apply to legal bodies public, within the meaning of the same provision, the fact that these services are provided under agreements concluded with public authorities of that Member State, at prices fixed by those agreements and the costs of which are partly borne by social security of that Member State.

2)       Article 391 of Directive 2006/112, read in conjunction with Article 377 thereof and the principles of legitimate expectations, legal certainty and fiscal neutrality, must be interpreted as meaning that it does not object to the exemption from value added tax from the provision of care provided by a private hospital establishment falling under Article 132 (1) (b) of that directive by reason of an amendment the conditions for the exercise of his activities which have occurred since he opted for the taxation system provided for by the national regulations of the Member State concerned, which provides for the obligation, for any taxable person making such a choice, to remain subject said regime for a certain period, when such a period has not yet expired.

Source Curia

Unofficial translation in English

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