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Flashback on ECJ Cases – C-141/00 (Kügler) – Exemption is not dependent on the legal form of the taxable person supplying the medical or paramedical services referred to in that provision

On September 10, 2002, the ECJ issued its decision in the case C-141/00 (Kügler).

Context: Article 13(A)(1)(c) and (g) of the Sixth Directive (77/388/EEC) – Exemption of care provided by capital companies – Services linked to welfare and social security work supplied by organisations, not being bodies governed by public law, recognised as charitable by the Member State concerned – Direct effect


Article in the EU VAT Directive

Artciles 13(A)(1)(c) and (g) of the Sixth VAT Directive (Art. 132(1)(c) and 132(1)(g) of the EU VAT Directive 2006/112/EC)

Article 132
1. Member States shall exempt the following transactions:
(c) the provision of medical care in the exercise of the medical and paramedical professions as defined by the Member State concerned;

(g) the supply of services and of goods closely linked to welfare and social security work, including those supplied by old people’s homes, by bodies governed by public law or by other bodies recognised by the Member State concerned as being devoted to social wellbeing;


Facts

  • Kügler is a limited liability company governed by German law which ran an out-patient care service from 1988 to 1990. Under its statutes Kügler directly pursued exclusively benevolent aims by supporting people who as a result of their physical condition were dependent on the assistance of others or were in need of economic assistance within the meaning of Paragraph 53(1)(2) of the Abgabenordnung (Tax Code) 1977.
  • Kügler sought to attain the object laid down in its statutes in particular through the provision of medical care, general care and domestic help.
  • The Finanzamt certified by a notice of 23 August 1988 whose validity expired on 31 December 1989 that Kügler pursued benevolent objectives.
  • By several notices, the Finanzamt assessed Kügler to turnover tax at a reduced rate for the years 1988, 1989 and 1990 on the basis of estimated taxable amounts.
  • Kügler lodged an objection on the ground that the transactions which it had carried out had to be exempt from turnover tax under Paragraph 4(14) and (16) of the UStG. Following the dismissal of its objection it brought an action before the Finanzgericht Berlin (Finance Court, Berlin) which was also unsuccessful.
  • The Finanzgericht Berlin found that Kügler did not exercise any of the professions referred to in the first sentence of Paragraph 4(14) of the UStG because, as a legal person, it did not meet the conditions for professional activity. Nor did it carry out transactions exempt under Paragraph 4(16) of the UStG because it did not run a body providing medical care within the meaning of Paragraph 4(16)(c) of the UStG and the tax exemption for the transactions of bodies providing out-patient care for those who are sick or in need of care which is laid down in Paragraph 4(16)(e) of the UStG as amended was not introduced until 1992.
  • The Finanzgericht Berlin further held that, since the exemption provisions set out in Article 13(A)(1)(c) and (g) of the Sixth Directive had been transposed into national law in conformity with the directive, Kügler could not rely on them. First, only natural persons fulfilling the conditions for exercise of the medical or paramedical professions met the requirements of Article 13(A)(1)(c) of the Sixth Directive. Second, Kügler was not an organisation recognised as charitable within the meaning of Article 13(A)(1)(g) of the Sixth Directive since providers of private care had not been included in the list of bodies in Paragraph 4(16) of the UStG.

Questions

1.     Does the tax exemption provided for in Article 13(A)(1)(c) of Directive 77/388/EEC apply only where the medical care is provided by an individual or is it independent of the legal form of the person providing the care?

2.     If the exemption is also applicable to capital companies, does it cover wholly or partially the activities of a capital company in the form of out-patient nursing (therapeutic care, general care and domestic help) which is provided by qualified nurses?

3.     Do the abovementioned services fall within the scope of Article 13(A)(1)(g) of Directive 77/388/EEC and can a taxable person rely on that provision?


AG Opinion

(1)    The exemption provided for in Article 13(A)(1)(c) of the 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 independent of the legal form of the person providing the medical care.

(2)    The exemption provided for in Article 13(A)(1)(c) of the Sixth Directive is applicable only to the turnover relating to therapeutic care provided by qualified nursing personnel, including such treatment provided on an out-patient basis, and to related services that are strictly necessary and physically and economically indissociable therefrom.

(3)    (a)    General care and domestic help fall within the scope of Article 13(A)(1)(g) of the Sixth Directive.

(b)    It cannot be excluded that Article 13(A)(1)(g) of the Sixth Directive has direct effect, even in the absence of relevant legislation in the State concerned, where the national court is able to determine, on the basis of all the conclusive evidence, that the taxpayer is an organisation recognised as charitable.


Decision

1. The exemption envisaged in Article 13(A)(1)(c) of the 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 not dependent on the legal form of the taxable person supplying the medical or paramedical services referred to in that provision.

2. The exemption envisaged in Article 13(A)(1)(c) of the Sixth Directive (77/388) applies to the provision of care of a therapeutic nature by a capital company running an out-patient service under which care, including home care, is provided by qualified nursing staff, to the exclusion of the provision of general care and domestic help.

3. (a) The provision of general care and domestic help by an out-patient care service to persons in a state of physical or economic dependence amounts to the supply of services closely linked to welfare and social security work within the meaning of Article 13(A)(1)(g) of the Sixth Directive (77/388).

(b) The exemption provided for in Article 13(A)(1)(g) of the Sixth Directive (77/388) may be relied upon by a taxable person before national courts in order to oppose national rules incompatible with that provision. It is for the national court to establish, in the light of all relevant factors, whether the taxable person is an organisation recognised as charitable within the meaning of the aforesaid provision.


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