VATupdate

ECJ C-573/20 (Casa di Cura Città di Parma) – Order – Deduction of input VAT by healthcare professionals based on a prorata

On April 14, 2021, the ECJ issued an Order in the case C-573/20 (Casa di Cura Città di Parma).

Context: Reference for a preliminary ruling – Article 53 (2) and Article 99 of the Rules of Procedure of the Court – Taxation – Common system of value added tax (VAT) – Sixth Directive 77/388 / EEC – Article 17 (2) under a) – Mixed taxable person – Prorata deduction – Public or private health facilities carrying out exempt activities – National regulations excluding the deduction of VAT relating to the acquisition of goods or services used for the needs of these exempt activities


Article in the EU VAT Directive

Article 13 A of the Sixth Directive provides:

1. Without prejudice to other provisions [of the Union], the Member States shall exempt, under the conditions which they lay down in order to ensure the correct and simple application of the exemptions provided for below and to prevent any fraud , evasion and [any] possible abuses:

b) hospitalization and medical care as well as operations closely related to them, provided by public law bodies or, under social conditions comparable to those which apply to the latter, by hospitals, care centers medical and diagnostic facilities and other duly recognized establishments of the same nature;

(c) personal care services provided within the framework of the exercise of the medical and paramedical professions as defined by the Member State concerned;

4         Article 17 (2), (3) and (5) of that directive provides:

2. To the extent that the goods and services are used for the purposes of his taxed transactions, the taxable person is authorized to deduct from the tax for which he is liable:

(a) the [VAT] due or paid for the goods which are or will be delivered to him and for the services which are or will be rendered to him by another taxable person;

3. Member States shall also grant to any taxable person the deduction or reimbursement of [VAT] referred to in paragraph 2 to the extent that the goods and services are used for the purposes:

(a) its operations falling within the economic activities referred to in Article 4 (2), carried out abroad, which would give rise to the right of deduction if these operations were carried out within the country;

b) its operations exempted in accordance with Article 14 paragraph 1 (i), Article 15 and Article 16 paragraph 1 under B, C and D and paragraph 2;

c) its operations exempted in accordance with Article 13 (B) (a) and (d) points 1 to 5, when the policyholder is established outside [the European Union] or when these operations are directly linked to goods which are intended for export to a country outside the [Union].

5. As regards goods and services which are used by a taxable person to carry out both transactions giving rise to the right to deduct referred to in paragraphs 2 and 3 and transactions not giving rise to the right to deduct. accepted only for the part of the [VAT] which is proportional to the amount relating to the first operations.

This pro rata is determined for all the transactions carried out by the taxable person in accordance with Article 19.

However, Member States may:

(a) authorize the taxable person to determine a pro rata for each sector of his activity, if separate accounts are kept for each of these sectors;

b) require the taxable person to determine a pro rata for each sector of his activity and to keep separate accounts for each of these sectors;

c) authorize or require the taxable person to make the deduction following the allocation of all or part of the goods and services;

d) authorize or require the taxable person to make the deduction, in accordance with the rule provided for in the first subparagraph, for all the goods and services used for all the transactions referred to therein;

e) provide, when the [VAT] which cannot be deducted by the taxable person is insignificant, that it will not be taken into account. “

5         Article 19 of that directive, which establishes the rules applicable to the calculation of the deduction pro rata, states, in paragraph 1:

The deduction pro rata, provided for in the first subparagraph of Article 17 (5), results from a fraction comprising:

– in the numerator, the total amount, determined per year, of turnover, [VAT] excluded, relating to transactions giving rise to the right to deduct in accordance with Article 17 (2) and (3);

– in the denominator, the total amount, determined per year, of turnover, [VAT] excluded, relating to transactions appearing in the numerator as well as to transactions which do not give rise to the right to deduct. Member States may also include in the denominator the amount of subsidies other than those referred to in Article 11 (A) (1) (a).

The pro rata is determined on an annual basis, fixed as a percentage and rounded to a figure which does not exceed the higher unit. “


Facts

  • Casa di Cura Città di Parma, a private hospital, brought an appeal before the Commissione tributaria provinciale di Parma (Provincial Tax Commission of Parma, Italy), seeking the annulment of the implicit decision of the tax administration, Provincial of Parma, to reject her request for reimbursement of the VAT which she had paid on the acquisitions of goods and services carried out for the purposes of carrying out her activities and which she had not been able to deduct.
  • The VAT has not been deducted due to the inclusion of exempt transactions referred to in Article 10, paragraph 1, paragraphs 18 and 19 of the Decree n o  633/1972 in calculating pro rata deduction of VAT in application of article 19, paragraph 5, of this decree read, in combination with article 19 bis thereof. Indeed, the applicable national regulations do not provide for the payment of VAT for health services and thus does not allow the deduction of VAT paid by health professionals on the acquisition of goods or services used for the needs of these benefits.
  • In particular, that national legislation does not authorize the deduction of input VAT paid for the acquisition of goods and services used for the purposes of exempt activities and therefore provides that the right to deduct VAT of a mixed taxable person is calculated on the basis of a pro rata corresponding to the ratio between the amount of transactions giving rise to the right to deduct and the total amount of transactions carried out during the year concerned, including exempt medical and health services.
  • The referring court considers that that national legislation is contrary to the objective of the neutrality of VAT and to the rule according to which that tax is imposed exclusively on the final consumer set out in Article 17 (2) (a) of the Sixth Directive, insofar as such a calculation of the deductible proportion would have the biased effect of making the health establishment the final consumer of the goods or services purchased in the exercise of its activities and of increasing the final price of the service concerned. According to it, the absence of absolute deductibility of VAT on the acquisitions of the taxpayer who has provided an exempt service generates “hidden VAT” ultimately weighing on the final consumer,
  • Finally, the referring court considers that, in so far as the regulations relating to VAT are not uniform at EU level, Italian operators are subject to discrimination compared to their competitors in other States. members who apply, under certain conditions, a reduced rate tax system, as appears from certain documents of the European Commission.
  • On 30/10/2020 the Commissione tributaria provinciale di Parma lodged VAT questions about the non-deductibility of VAT for subjects who operate in the health sector and carry out only exempt operations: it is clear that the health care worker who has not been able to deduct the VAT on purchases relating to his business ends up “downloading” this higher cost on the patient or in any case on those who benefit from these services, increasing the final cost of its performance.

Questions

  1. Is there a conflict between national law and [Union] law, and more specifically between, on the one hand, Article 19 (5) and Article 19a [Decree n o  633/1972] (that is to say national rules governing mechanism called the “proportion of non-deductible VAT”) and, secondly, Article 17, paragraph 2 under a) of the Sixth Directive?

  2. The inequality of treatment that exists between Italian operators intervening in the health sector, who are considered as “final consumers” (on which VAT weighs) and operators intervening in the health sector in other States members of the Union (in Belgium, Bulgaria, Germany, Greece, Spain and France) considered as “intermediary operators” (entitled to deduct VAT) [is it compatible with the right to The union] ?

  3. Is there an unequal treatment, as regards the VAT regime, between the different Member States of the Union due to the VAT exemption applied to medical and health services in Italy, since, in the other EU Member States (Belgium, Bulgaria, Germany, Greece, Spain and France), the same services are subject to VAT, different VAT rates and, therefore, a right to the different deduction thus corresponding to identical medico-sanitary services?

  4. The inequality existing between the Italian operators intervening in the health sector (including Casa di Cura Città di Parma) and the operators of the other Member States of the Union (in Belgium, Bulgaria, Germany, Greece , in Spain and France) with regard to the subject to VAT of the medical and health services of the latter and, therefore, the right to deduction and / or reimbursement of VAT paid on acquisitions that for them, unlike other operators intervening in the health sector, [is it compatible with EU law]? “

  5. commercialistatelematico.com

AG Opinion

None


Decision (Order)

Article 17 (2) (a) of Sixth Council Directive 77/388 / EEC of 17 May 1977 on the harmonization of the laws of the Member States relating to turnover taxes – System common value added tax: uniform base, must be interpreted in the sense that it does not preclude a national regulation which does not authorize the deduction of the value added tax (VAT) paid upstream for the acquisition of goods and services used for the needs of exempt activities and which therefore provides that the right to deduct VAT of a mixed taxable person is calculated on the basis of a pro rata corresponding to the ratio between the amount of transactions giving rise to the right to deduct and the total amount of transactions carried out during the year in question,including exempt medical and health services.


Similar ECJ cases

  • C-560/11

Source


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