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
- C-141/00 (Kügler) – Exemption is not dependent on the legal form of the taxable person supplying the medical or paramedical services referred to in that provision
- C-498/03 (Kingscrest Associates and Montecello) – The word ‘charitable’ which must be interpreted in an uniform way in all the language versions of the Directive
- C-415/04 (Kinderopvang Enschede) – Exemption for services as an intermediary between persons seeking and persons offering a childcare service
- C-174/11 (Zimmermann) – VAT exemption of ambulatory care services provided by commercial providers, is contrary to EU law
- C-594/13 («go fair» Zeitarbeit) – Concept of ‘organizations which are recognized as institutions of a social nature’
- C-335/14 (Les Jardins de Jouvence) – Charitable nature of services provided by a serviced residence are VAT exempted
- C-543/14 (Ordre des barreaux francophones and germanophone and Others) – Services supplied by lawyers for clients who qualify for legal aid under a national legal aid scheme are not VAT exempted
- C-657/19 (Finanzamt D.) – VAT exemption of providing advice for the care funds set up at the health insurance funds
- C-846/19 (EQ) – Supply of services for the benefit of adults lacking legal capacity and intended to protect them in civil matters are VAT exempted
- C-620/21 (Momtrade Ruse) – VAT exemption for social services to natural persons in other member states
ECJ Cases not yet decided
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- VATupdate.com – Your FREE source of information on ECJ VAT Cases
