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I GmbH: limiting exemption for private hospitals breached fiscal neutrality – AGO

Hospital and medical care is exempt from VAT if it takes place in a public hospital, or if it takes place under comparable social conditions in a duly recognised private hospital. Germany limited the exemption to private hospitals which were engaged by certain public health insurance funds, or which performed at least 40% of their services at public sector rates. I GmbH, a private hospital, challenged this rule on the basis that it breached the principle of fiscal neutrality.

In the Opinion of AG Gerard Hogan, private hospitals were “duly recognised” if they met professional standards relating to healthcare. Recognition was required to ensure that unauthorised or illegal clinics would not also qualify for VAT exemption. The fact that hospital care might be paid under a contract with a national health insurance fund should not be relevant to whether it was “duly recognised”. The requirement that a private hospital offer services at a public sector rate might be a “comparable social condition”, but the ability of healthcare funds to determine which private hospitals might exempt their services by choosing which ones to engage with was plainly incompatible, in the AG’s Opinion, with the Principal VAT Directive.

Source Deloitte

See also ECJ C-228/20 (I GmbH) – AG Opinion – VAT exemption for private hospital that is not governed by public law and has no agreements with health insurance funds

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