ECJ C-620/21 Momtrade Ruse vs BG (Questions): VAT exemption for social services to natural persons in other member states?

Momtrade Ruse is a limited liability company that mainly provides extramural social services. Since 24-06-2014, it has been registered on a voluntary basis in accordance with the ZDDS (Value Added Tax Act). In the context of the tax audit that was concluded with the additional assessment of 04-10-2018, Momtrade Ruse submitted service contracts with several natural persons with German and/or Austrian nationality as clients. Under these agreements, the company provided employees to take care of the clients and provide household help. In accordance with Regulation 904/2010, the German tax authorities have initiated an exchange of information. It was then established that the services are not subject to German tax, but must be taxed in Bulgaria according to the ZDDS. On the basis of the documents provided by the audited company, the revenue authorities established that there was no contract for the provision of ‘social services’, as the individual needs of the customers were lacking. They assumed that since the service is in reality provided in another Member State, not only the ZSP, but also German or Austrian law is relevant. Momtrade Ruse may be exempted under Article 40(1) of the ZDDS only if it provides evidence which, under the law of the other Member State concerned, demonstrates that the services provided on its territory are of a social nature.

The referring court observes that the exemptions provided for in Article 132 of Directive 2006/112 must be interpreted strictly, since they depart from the general principle that VAT is charged on any service supplied by a taxable person for consideration. The referring court asks for an interpretation of Article 132(1)(g) of Directive 2006/112 in order to determine whether a commercial undertaking registered in a Member State as a social service provider is can rely on this provision to claim a tax exemption for social services provided by it to natural persons who are nationals of other Member States in those States, and whether it is relevant to answer this question that the recipients of the services are provided by commercial companies registered in the Member State where the services are provided. If the question is answered in the affirmative and the supplies exempt under Article 132(1) of Directive 2006/112 are autonomous concepts of EU law,

Preliminary questions:

  1. Can Article 132(1)(g) of the VAT Directive be interpreted as meaning that a commercial undertaking registered in a Member State (in this case Bulgaria) as a provider of social services may rely on that provision in order to make a tax exemption for social services that it has provided to natural persons who are nationals of other Member States in those Member States? Is it important for the answer to this question that the provider has been presented with the recipients of the services by trading companies that are registered in the Member States where the services are provided?
  2. If the first question is answered in the affirmative, on the basis of what criteria and according to which law – Bulgarian and/or Austrian and German law – is it necessary, in the interpretation and application of the relied upon provision of EU law, to assess whether the controlled company is ‘as institution of a social nature’ is recognized and considered to be services ‘closely related to social work and social security’?
  3. According to that interpretation, is the fact that a commercial undertaking is registered as a provider of social services as defined under national law sufficient for the undertaking to be classified as an institution recognized by the Member State concerned as an ‘institution of a social nature’?

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