On November 18, 2010, the ECJ issued its decision in the case C-156/09 (Verigen Transplantation Service International).
Context: Sixth VAT Directive – Article 13(A)(1)(c) – Exemptions for activities in the public interest – Provision of medical care – Removal and multiplication of cartilage cells for the purpose of reimplantation in the patient
Article in the EU VAT Directive
Article 13(A)(1)(c) of the Sixth EU VAT Directive (Art. 132(1)(c) of the EU VAT Directive 2006/112/EC)
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;
- VSTI is a biotechnology company established in Germany and operating in the field of tissue engineering. It researches, develops, produces and markets technologies to diagnose and treat human tissue diseases, and in particular cartilage diseases.
- The dispute in the main proceedings concern VTSI’s transactions involving the multiplication of chondrocytes for reimplantation into the patient, in cases where the customers to whom the service is supplied (doctors or clinics) are resident in other Member States and VTSI has stated their VAT identification number on its invoices.
- The process is described by the Bundesfinanzhof in the following way. The doctor or clinic sends VTSI biopsy cartilage material taken from the patient. VTSI treats the tissue to make it possible to remove the chondrocytes. After preparation in their own blood serum in an incubator they are multiplied through growth, normally within three to four weeks. The resulting cells may, or may not, be introduced into a collagen membrane to produce a ‘cartilage plaster’. In either event, they are sent to the patient’s doctor or clinic to be reimplanted in the patient.
- VTSI treated those services as not liable to VAT when provided to customers resident in other Member States.
- The Finanzamt, however, considered them to be taxable and, by decision of 17 December 2003, assessed tax owed by VSTI on its turnover for 2002.
- In the proceedings challenging that decision and those before the Finanzgericht Köln (Cologne Finance Court), VTSI argued that the multiplication of cartilage cells did not constitute medical care, but rather, ‘routine laboratory services’ carried out by biotechnical or medical-technical assistants. It explained that the necessary quality controls were carried out by a pharmacist and an external chemist.
- The Finanzgericht Köln upheld VTSI’s challenge. It ruled that cell multiplication was a service which had to be regarded as ‘work on movable tangible property’ within the meaning of Article 3a(2)(3)(c) of the UStG. That court considered that after removal from the patient’s body, organs taken for transplantation became movable property. Whether the separated body part was subsequently used for transplantation in the same patient (autologous usage) or another (allogeneic usage) could have no bearing on whether or not it was subsumed under the term movable tangible property.
- The Finanzgericht Köln found that customers resident in other Member States had used the VAT identification numbers issued to them in their respective Member States and the transactions at issue were therefore not taxable in Germany.
- The Finanzamt appealed on a point of law against that judgment. Before the Bundesfinanzhof, it argues that the cells do not become movable property as a result of their short-term separation from the body, so that cell multiplications do not constitute ‘work’ within the meaning of Paragraph 3a(2)(3)(c) of the UStG. Nor, according to the Finanzamt, is there any use of a VAT identification number issued by another Member State within the meaning of Paragraph 3a(2)(3)(c) of the UStG, since that would have required a prior express agreement between the claimant and the customer.
- The referring court considers that the handover of the multiplied cartilage cells to the patient’s doctor or clinic does not constitute a supply of goods since VTSI cannot dispose freely of the cartilage material. Cell multiplication is a supply of services and is not taxable in Germany when that service is supplied in another Member State. However that could be the case only if Article 28b(F) of the Sixth Directive were interpreted as covering the service supplied by VTSI. Otherwise, the transaction should be taxable in Germany unless it could be regarded as constituting ‘provision of medical care’ within the meaning of Article 13(A)(1)(c) of that directive.
1. Is the first paragraph of Article 28b(F) of [the Sixth Directive] to be interpreted as meaning that:
- (a) cartilage material (“biopsy material”) which is taken from a human being and entrusted to an undertaking for the purpose of cell multiplication and subsequent return as an implant for the patient concerned constitutes “movable tangible property” for the purposes of this provision;
- (b) the removal of joint cartilage cells from the cartilage material and the subsequent cell multiplication constitute “work” on movable tangible property for the purposes of this provision;
- (c) the service has been supplied to a customer “identified for (VAT) purposes” simply if the (VAT) identification number is stated in the invoice of the supplier of the service, without any express written agreement as to its use having been made?
2. If any of the above questions is answered in the negative, is Article 13(A)(1)(c) of the Sixth Directive to be interpreted as meaning that the removal of the joint cartilage cells from the cartilage material taken from a human being and the subsequent cell multiplication constitute the “provision of medical care” where the cells obtained from the cell multiplication are reimplanted in the donor?
On a proper construction of Article 13A(1)(c) 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, the removal of joint cartilage cells from biopsy cartilage material taken from a human being and their subsequent multiplication, with a view to reimplantation for therapeutic purposes, constitute the ‘provision of medical care’, regardless of whether the cells obtained from the cell multiplication are intended for reimplantation in the donor or in another person.
Article 13(A)(1)(c) 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, as amended by Council Directive 95/7/EC of 10 April 1995, must be interpreted as meaning that the removal of joint cartilage cells from cartilage material taken from a human being and the subsequent multiplication of those cells for reimplantation for therapeutic purposes constitute ‘provision of medical care’ in accordance with that provision.
Article 13A(1)(c) of the Sixth Directive must be interpreted as meaning that the isolation of articular cartilage cells from cartilage material collected from humans and their subsequent multiplication for reimplantation for therapeutic purposes is ‘human health care’ within the meaning of this provision.
Similar ECJ cases
- Focus on ”Exemption – Provision of medical care in the exercise of the medical and paramedical professions” (Art. 132(1)(c))