On April 7, 2022, the ECJ issued its decision in the case C-228/20 (I GmbH).
Context: Reference for a preliminary ruling – Common system of value added tax (VAT) – Directive 2006/112/EC – Article 132(1)(b) – Exemptions for certain activities in the public interest – Exemption for hospital and medical care – Private hospital – Duly recognised establishment – Comparable social conditions
Article in the EU VAT Directive
Article 132(1)(b) of the EU VAT Directive 2006/112/EC
Article 132
1. Member States shall exempt the following transactions:
(b) hospital and medical care and closely related activities undertaken by bodies governed by public law or, under social conditions comparable with those
applicable to bodies governed by public law, by hospitals, centres for medical treatment or diagnosis and other duly recognised establishments of a similar
nature;
Facts
The case concerns the question whether transactions related to the operation of a hospital are exempt from sales tax under Paragraph 4 (14) of the UStG and Article 132 (1) (b), respectively, of the VAT Directive.
The applicant is a limited liability company and provides hospital services within the meaning of the German Federal Law on Healthcare Charges and the Law on Hospital Financing. It has received a government license for its business activities. However, it is not a plan hospital of the Land of Lower Saxony, nor is it a public body, so there are no agreements with the statutory or voluntary health insurance funds. This includes patients who pay the costs for nursing themselves in advance, embassy patients, private insured persons, German armed forces.
In the context of a special sales tax audit, the tax authorities’ inspector came to the conclusion that most of the applicant’s transactions are not exempt from sales tax. Only the activities of hospitals approved under § 108 SGB V are exempt from sales tax. However, the applicant is not an approved hospital. The same is clear from Article 132 (1) (b) of the VAT Directive. Hospital nursing is only provided under conditions comparable to those of public law bodies if a significant proportion of the patients are entitled to reimbursement of costs under § 13 SGB V. In this case, the share of this patient group fluctuates around 10%.
The applicant considers that the transactions at issue are exempt from VAT under Article 132 (1) (b) of the VAT Directive. According to her, it operates a hospital recognized according to § 30 GewO, which provides hospital services and medical care as a public body.
Consideration:
With regard to the first question, the referring court takes the view that the applicant is not a body governed by public law, its acts are not exempt under Paragraph 4 (14) (b) of the UStG. In addition, there is no tax exemption under § 4, No. 14 (b) (aa) UStG. The court is inclined to rule that § 4, No. 14 (b) (aa) of the UStG is incompatible with Article 132 (1) (b) of the VAT Directive, since it contains the tax exemption for the services provided by Hospitals operated by enterprises that are not bodies governed by public law are made dependent on need for social security considerations.
With regard to the second question referred for a preliminary ruling, it is relevant, according to the court, if the applicant relies on Article 132 (1) (b) of the VAT Directive, whether hospital care is provided by the applicant under social conditions comparable to the conditions under which bodies governed by public law perform these services. The referring court has doubts as to whether this involves examining the profitability of the hospital or whether the question should be answered from the patient’s point of view, with the relevance of whether the costs of the majority of patients are reimbursed by social security bodies.
Source Minbuza.nl
Questions
Is Paragraph 4, point 14(b), of the Umsatzsteuergesetz (Law on Turnover Tax) (UStG) compatible with Article 132(1)(b) of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax (‘the VAT Directive’), 1 in so far as hospitals which are not bodies governed by public law qualify for exemption from tax on condition that they are approved within the meaning of Paragraph 108 of the Sozialgesetzbuch (SGB) V (Social Security Code, Book V)?
If Question 1 is to be answered in the negative: When do hospitals governed by private law provide hospital care under social conditions comparable with those applicable to bodies governed by public law within the meaning of Article 132(1)(b) of the VAT Directive?
AG Opinion (AG Hogan)
I therefore consider that the Court should answer the two questions referred by the Niedersächsisches Finanzgericht (Finance Court, Lower Saxony, Germany) as follows:
(1) Article 132(1)(b) of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax must be interpreted as precluding a national legislation, such as that at issue in the main proceedings, which lays down as a condition to be exempted from VAT, that a private hospital must either be engaged to supply care by providers of statutory accident, or be part of the hospital plan of a Land, or must have concluded an agreement for the provision of care with a national or regional health insurance fund. In particular, those requirements are not social conditions in the sense understood by Article 132(1)(b) of that directive.
However, a requirement, such as the one mentioned by the German Government – which requires that a private hospital seeking to avail of a VAT exemption must have carried out, during the previous financial year, at least 40% of hospital services invoiced for an amount lower than the amount reimbursable by the social security bodies – may constitute a social condition for the purposes of Article 132(1)(b) of Directive 2006/112 if there is a comparable requirement imposed on bodies governed by public law.
(2) The concept of ‘social conditions comparable with those applicable to bodies governed by public law’ used in Article 132(1)(b) of Directive 2006/112 should be interpreted as referring to all conditions that private institutions must meet in order to be subject to either identical or comparable rules prescribed by law governing the relationship between bodies governed by public law and their patients to which they must comply with in all circumstances when they provide hospital treatment, medical care or operations closely linked to such services. Compliance with that condition by a private establishment may be inferred from the obligations that that establishment has contractually imposed on itself with respect to patients.
Decision
1. Article 132(1)(b) of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax must be interpreted as precluding national legislation which – by stipulating that the provision of medical care by a private hospital is to be exempt from value added tax if that establishment is approved in accordance with the national provisions relating to the general health insurance regime, following its inclusion in a Land-level hospital plan or the conclusion of care supply contracts with statutory health insurance or substitute funds – results in comparable private hospitals which supply similar services under social conditions comparable with those applicable to bodies governed by public law being treated differently as regards the exemption laid down in that provision.
2. Article 132(1)(b) of Directive 2006/112 must be interpreted as meaning that, in order to determine whether medical care provided by a private hospital is supplied under social conditions comparable with those applicable to bodies governed by public law, the competent authorities of a Member State may take into consideration – where they are intended to attain the objective of reducing medical costs and making high-quality care more accessible to individuals – the regulatory conditions applicable to the services supplied by hospitals governed by public law and indicators of that private hospital’s performance in terms of staff, premises and equipment and the cost-efficiency of its management, in so far as those indicators are also applicable to establishments governed by public law. Account may also be taken of the method of calculating fixed-rate daily fees and the fact that the services supplied by that private hospital are borne by the social security regime or under contracts concluded with public authorities, so that the cost borne by patients is similar to that borne by patients for similar services supplied by hospitals governed by public law.
Source
Similar ECJ cases
- C-91/12 (PFC Clinic) – Aesthetic operations and aesthetic treatments exempt from VAT under certain conditions
- C-700/17 (Wolf-Henning Peters) – Condition that the medical care is provided in the context of a relationship of trust between the patient and the care provider
- C-211/18 (Idealmed III) – VAT exemption for private hospital
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