Roadtrip through ECJ Cases – Focus on ”Exemption related to welfare and social security work” (Art. 132(1)(g))

Last update: August 6, 2025

Article 132(1)(g) of the EU VAT Directive 2006/112/EC is a key provision that exempts certain social welfare services from VAT. Here’s why it’s significant:

‍‍ What Article 132(1)(g) Says

It requires Member States to exempt from VAT:

“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 organizations recognized as charitable by the Member State concerned.”

Why It’s Important

1. Promotes Social Inclusion
- Ensures that services aimed at supporting vulnerable groups—elderly, disabled, low-income individuals—are not taxed, making them more affordable and accessible.
2. Supports Non-Profit and Charitable Work
- Applies to recognized charitable organizations and public bodies, reinforcing their role in delivering social services without commercial pressure.
3. Encourages Member State Flexibility
- Member States have discretion to recognize organizations as charitable, allowing adaptation to national welfare systems and traditions.
4. Clarified by ECJ Case Law
- In go fair Zeitarbeit OHG v Finanzamt Hamburg-Altona (C-594/13), the ECJ ruled that temporary work agencies supplying care workers were not exempt, as they lacked recognition as charitable bodies and their services were not directly linked to welfare work.
5. Interacts with Articles 133 and 134
- Article 133 allows Member States to impose conditions on private entities.
- Article 134 restricts exemptions if services are not essential or are mainly for profit.

Summary Table

Feature	Explanation
Scope	Welfare and social security services
Eligible Providers	Public bodies or recognized charitable organizations
Purpose	Reduce cost burden on essential social services
Limitations	Must be closely linked to welfare work; not primarily commercial
Legal Interpretation	ECJ decisions help define boundaries of exemption

Great choice! Here’s a clear comparison between Article 132(1)(b) and Article 132(1)(g) of the EU VAT Directive 2006/112/EC, showing how they each support public interest services but with distinct scopes and conditions:

⚖️ Comparison: Article 132(1)(b) vs. 132(1)(g)

Feature	Article 132(1)(b) – Healthcare	Article 132(1)(g) – Social Welfare
Scope of Exemption	Hospital and medical care, and closely related activities	Welfare and social security work, including services by old people’s homes
Eligible Providers	Bodies governed by public law or organizations with similar purposes	Public bodies or organizations recognized as charitable by the Member State
Purpose	Ensure access to essential healthcare without VAT burden	Support vulnerable groups through affordable social services
Examples of Services	Medical treatment, diagnostics, hospital care	Elderly care, disability support, social housing, community outreach
Recognition Requirement	Must be recognized as having similar public interest purposes	Must be recognized as charitable (Member State discretion)
Key Legal Criteria	Services must be directly related to medical care	Services must be closely linked to welfare/social security work
Risk of Exclusion	Commercial providers may be excluded if not recognized	For-profit entities or those lacking charitable status may be excluded
Relevant ECJ Case Law	Dornier (C-45/01) clarified exemption for private hospitals	go fair Zeitarbeit (C-594/13) clarified limits for care staffing agencies

Key Distinction

132(1)(b) focuses on healthcare as a public good, often delivered by hospitals and medical professionals.
132(1)(g) targets social welfare, often delivered by charities and care institutions, with broader discretion for Member States to define “charitable.”

Relevant article in the EU VAT Directive 2006/112/EC

Art. 132(1)(g) of the EU VAT Directive 2006/112/EU – Article 13A(1)(g) of the Sixth VAT Directive

Article 132 (Exemption)

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;

ECJ Cases decided