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;
Background
- Momtrade Ruse is a limited liability company that provides extramural social services. It was registered on a voluntary basis in accordance with the Value Added Tax Act.
- During a tax audit, it was discovered that the services provided to natural persons with German and/or Austrian nationality as clients were not subject to German tax, but must be taxed in Bulgaria according to the ZDDS.
- The revenue authorities established that there was no contract for the provision of ‘social services’ and assumed that since the service is 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 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 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.
Questions
- Can a Bulgarian commercial undertaking registered as a provider of social services use Article 132(1)(g) of the VAT Directive to exempt social services provided to nationals of other EU Member States?
- Does it matter if the recipients were presented by trading companies registered in the Member States where the services were provided? If so, what criteria and laws, Bulgarian and/or Austrian and German, should be used to determine if the undertaking is an ‘institution of a social nature’ providing ‘closely related’ services?
- Would being registered as a provider of social services under national law be sufficient for recognition as an institution of a social nature?
Decision
- Article 132(1)(g) of Directive 2006/112/EC, as amended by Directive 2008/8/EC, allows for the exemption of social services provided to natural persons residing in a Member State other than the one in which the service provider has established their economic activity. It is irrelevant whether the service provider used a company established in that other Member State to contact its customers.
- However, the nature of the services and the characteristics of the company must be examined in accordance with the law of the Member State where the company has established its economic activity to determine whether the benefits fall within the concept of ‘provision of services closely linked to social assistance and social security carried out by a body recognized as having a social character by the Member State concerned’.
- The fact that a company is registered as a provider of social services in accordance with the legislation of the taxing Member State is not sufficient to consider that this company falls within the concept of ‘a body recognized as having a social character by the Member State concerned’, only when such registration is subject to prior verification by the competent national authorities of the social character of that company for the purposes of that provision.
See also
- C-620/21 (Momtrade Ruse) – Judgment – VAT exemption for social services to natural persons in other member states
- Roadtrip through ECJ Cases – Exemption related to welfare and social security work (Art. 132(1)(g))
