ECJ C-620/21 (Momtrade Ruse) – AG Opinion – VAT exemption for social services to natural persons in other member states

On December 1, 2022, the ECJ issued the AG Opinion in the case C-620/21 (Momtrade Ruse).

Context: Reference for a preliminary ruling – VAT Directive – Article 132(1)(g) – Exemption for the supply of services closely linked to welfare and social security work – Body recognised as being devoted to social wellbeing – Member State concerned which recognises the body as being devoted to social wellbeing

Articles in the EU VAT Directive

Article 132(1)(g) of the EU VAT Directive 2006/112/EC

Article 132
1. Member States shall exempt the following transactions:

(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;

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,

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’?

• minbuza.nl

AG Opinion

(1)      Article 132(1)(g) of Directive 2006/112/EC of 28 November 2006 on the common system of value added tax (‘the VAT Directive’) may, despite the discretion accorded to Member States therein, be relied upon directly by an individual vis-à-vis the Member State of taxation. This is true irrespective of whether the place of supply is determined on the basis of the destination principle or the origin principle and irrespective of whether a placement agency arranged that service.

(2)      Article 132(1)(g) of the VAT Directive is to be interpreted as meaning that the Member State concerned which takes the decision on recognition of other bodies is the State in which the services are actually carried out and whose social welfare systems generally pay for those services. In the case of cross-border supplies of services, this can also be a Member State on which the directive by means of the place of supply rules does not confer the corresponding power of taxation.

On the other hand, the Member State on which the directive on the place of supply confers the power of taxation must assess, solely on the basis of its own law (if it correctly transposes Article 132(1)(g) of the VAT Directive), whether the supply concerned is a supply of services closely linked to welfare and social security work and is adequately proven.

(3)      The mere fact that a commercial company is registered as a provider of social services with a State agency does not suffice in itself in order to be able to infer that a correct discretionary decision was made in recognition of it as a body devoted to social wellbeing.

Source