On June 14, 2007, the ECJ issued its decision in the case C-434/05 (Horizon College). This case deals with the question whether the teaching staff employed by one educational establishment made available, for consideration, to another is exempted from VAT.
Context: Sixth VAT Directive – Exemptions – Article 13A(1)(i) and 13A(2) – Teaching staff employed by one educational establishment made available, for consideration, to another
Article in the EU VAT Directive
13 A(1)(i) of the Sixth Directive
Article 13 of the Sixth Directive provides:
‘A. Exemptions for certain activities in the public interest
1. Without prejudice to other Community provisions, Member States shall exempt the following under conditions which they shall lay down for the purpose of ensuring the correct and straightforward application of such exemptions and of preventing any possible evasion, avoidance or abuse
(i) children’s or young people’s education, school or university education, vocational training or retraining, including the supply of services and of goods closely related thereto, provided by bodies governed by public law having such as their aim or by other organisations defined by the Member State concerned as having similar objects
2. (a) Member States may make the granting to bodies other than those governed by public law of each exemption provided for in (1)(b), (g), (h), (i), (l), (m) and (n) of this Article subject in each individual case to one or more of the following conditions:
– they shall not systematically aim to make a profit, but any profits nevertheless arising shall not be distributed, but shall be assigned to the continuance or improvement of the services supplied,
– they shall be managed and administered on an essentially voluntary basis by persons who have no direct or indirect interest, either themselves or through intermediaries, in the results of the activities concerned,
– they shall charge prices approved by the public authorities or which do not exceed such approved prices or, in respect of those services not subject to approval, prices lower than those charged for similar services by commercial enterprises subject to value added tax,
– exemption of the services concerned shall not be likely to create distortions of competition such as to place at a disadvantage commercial enterprises liable to value added tax.
(b) The supply of services or goods shall not be granted exemption as provided for in (1)(b), (g), (h), (i), (l), (m) and (n) above if:
– it is not essential to the transactions exempted,
– its basic purpose is to obtain additional income for the organisation by carrying out transactions which are in direct competition with those of commercial enterprises liable for value added tax.’
- Stichting Regionaal Opleidingen Centrum Noord-Kennemerland/West Friesland (Horizon College) is a teaching establishment at Alkmaar in the Netherlands. For the purposes of Article 13A(1)(i) of the Sixth Directive, it appears to be an organisation defined by the Member State as having educational objects. It principally provides secondary-level and vocational education.
- It also, at least between 1995 and 1999, seconded teachers in its employment to other such establishments, to meet temporary shortages of teaching staff. Under the secondment contract, the teacher was assigned work by the other establishment, which also paid for liability insurance. The teacher’s salary continued to be paid by Horizon College, which claimed the bare cost back from the other establishment, without taking any profit or charging VAT.
- The tax authorities however considered that the service provided was not covered by the exemptions in the Sixth Directive, and therefore issued an additional assessment to VAT for the years 1995 to 1999.
- Horizon College has challenged that assessment. Its appeal is now before the Hoge Raad (Supreme Court), which notes that, when members of teaching staff in an educational establishment are temporarily unavailable, they must be replaced for the period of their unavailability in order to achieve the aim of providing education, and that the levying of VAT automatically increases the cost price of that education.
– On a proper construction of Article 13A(1)(i) of Sixth Council Directive 77/388/EEC, the temporary supply of a teacher to an educational establishment, in order to provide teaching services under the responsibility of that establishment, does not constitute provision of education or vocational training or retraining, but does in principle constitute the supply of a service closely related thereto.
– In order to qualify for exemption from VAT under that provision, the supply in question must be made by a body or organisation as referred to therein, and must comply with the requirements of Article 13A(2)(b) of the same directive, as clarified by the Court in its judgment in Case C-415/04 Stichting Kinderopvang Enschede, and, where applicable, with those of Article 13A(2)(a).
1. Article 13A(1)(i) of Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes – Common system of value added tax: uniform basis of assessment, is to be interpreted as meaning that the expression ‘children’s or young people’s education, school or university education, vocational training or retraining’ does not cover the making available, for consideration, of a teacher to an educational establishment, within the meaning of that provision, in which that teacher temporarily carries out teaching duties under the responsibility of that establishment, even if the body which makes the teacher available is itself a body governed by public law that has an educational aim, or another organisation defined by the Member State concerned as having similar objects.
2. Article 13A(1)(i) of Sixth Directive 77/388, read in conjunction with Article 13A(2) of that directive, is to be interpreted as meaning that the making available, for consideration, of a teacher to an educational establishment in which that teacher temporarily carries out teaching duties under the responsibility of that establishment, may constitute a transaction that is exempt from value added tax on the basis that it is a supply of services ‘closely related’ to education, within the meaning of Article 13A(1)(i), if such a teacher placement is a means of better enjoying the education deemed to be the principal service, provided, however, – which it is for the national court to verify – that:
– both that principal service and the placement which is closely related to it are provided by bodies referred to in Article 13A(1)(i), taking into account, where appropriate, any conditions which may have been introduced by the Member State concerned pursuant to Article 13A(2)(a);
– that placement is of a nature and quality such that, without recourse to such a service, there could be no assurance that the education provided by the host establishment and, consequently, the education from which its students benefit, would have an equivalent value; and
– the basic purpose of such a placement is not to obtain additional income by carrying out a transaction which is in direct competition with commercial enterprises liable for value added tax.
Make it available to the hiring educational institution of a teacher employed by another educational institution for a fee
The terms ‘education of children or young people, school or university education, vocational training or retraining’ do not cover the provision of a teacher for remuneration to an educational establishment where that teacher provides education on a temporary basis under the responsibility of that educational establishment even if the providing institution is itself a body governed by public law with an educational purpose or another organization recognized by the Member State concerned as a body with similar purposes.
The provision of a teacher for remuneration to an educational establishment where that teacher provides education on a temporary basis under the responsibility of that institution may constitute a VAT-exempt transaction in so far as services are ‘closely related’ to education, if they are provision is a means to ensure that the education regarded as the main achievement takes place under optimal conditions, but on the condition that:
– both that principal service and the closely related posting are performed by the bodies referred to in Article 13A (1) (i) of the Sixth Directive , taking into account, where appropriate, the conditions laid down by the Member State concerned under Article 13A (2) (a) of that directive, if any,
– the nature or quality is of such a nature that without this service equivalence cannot be assured of the education provided by the hiring institution and thus provided to its students, and
– that posting is not primarily intended to provide additional revenue through the performance of an act carried out in direct competition with commercial undertakings subject to value added tax.
Similar ECJ cases
- C-445/05 (Haderer) – A freelancer providing assistance with schoolwork and running ceramics and pottery courses in adult education centres can be exempted from VAT
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