ECJ VAT C-513/24 (Oblastní nemocnice Kolín) – AG Opinion – Costs for non-deductible VAT activities do not guarantee proportional deductions

On September 25, 2025, the ECJ has released the facts and question in the case C-513/24 (Oblastní nemocnice Kolín).

Context: Reference for a preliminary ruling – Harmonisation of fiscal legislation – Directive 2006/112/EC – Common system of value added tax (VAT) – Right to deduct VAT – Article 173(1) – Proportional deduction – Concept of ‘general costs’ – Minimum technical and material equipment of healthcare facilities required in order to obtain a licence to supply healthcare services in respect of which VAT is not deductible, but which are necessary for the supply of services in respect of which VAT is deductible

Summary

Facts of the Case: Oblastní nemocnice Kolín, a.s., a Czech hospital, sought to determine its right to deduct VAT on goods and services necessary for obtaining a license to provide healthcare services, which are exempt from VAT, while also providing services that are VAT-deductible.
Legal Questions: The referring court asked whether Article 173(1) of the VAT Directive allows for the deduction of VAT on minimum technical and material equipment required for healthcare services, even when those services are VAT-exempt.
Decision: The Advocate General proposed that the VAT Directive does not grant a blanket right to deduct VAT for costs associated with acquiring goods or services that are required for activities related to VAT-exempt healthcare services, unless a direct and immediate link to taxable activities is demonstrated.
Justification: The opinion emphasized that while Member States can apply VAT deductions, the costs must be directly linked to taxable activities. A statutory obligation to purchase certain goods does not automatically establish this link, and each case must be assessed individually.
Implications: This ruling clarifies the conditions under which VAT can be deducted for healthcare facilities, emphasizing the necessity for a clear connection between input and output transactions to uphold the principles of fiscal neutrality and tax compliance within the VAT framework.

Article in the EU VAT Directive

Article 173(1) of the EU VAT Directive 2006/112/EC.

Article 173 (Right to Deduct VAT – Proportional Deduction)
1. In the case of goods or services used by a taxable person both for transactions in respect of which VAT is deductible pursuant to Articles 168, 169 and 170, and for transactions in respect of which VAT is not deductible, only such proportion of the VAT as is attributable to the former transactions shall be deductible.
The deductible proportion shall be determined, in accordance with Articles 174 and 175, for all the transactions carried out by the taxable person.

Facts

The appellant, a hospital, filed a claim for a partial tax deduction in relation to services and equipment used for both healthcare services (non-deductible) and other services (deductible). The Tax Office partially recognized the deduction, but the appellant challenged the decision.
The Prague Regional Court dismissed the appeal, stating that only costs directly related to the provision of other services could be considered overhead costs eligible for deduction.
The appellant appealed the judgment, arguing that all goods and services related to its operation should be considered overhead costs.
They claimed that the equipment and services were necessary for obtaining a healthcare service license, meeting minimum requirements set by regulations.
The appellant argued that these costs should be deductible as they were not acquired exclusively for a specific purpose.

Questions

Must Article 173(1) of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax be interpreted as meaning that, where a transaction in respect of which VAT is deductible depends on the possession of a licence to carry out transactions in respect of which VAT is not deductible (in this case, health services), do the goods and the services relating thereto, which constitute, under national legislation, the minimum technical and material equipment for healthcare facilities, on which the provision of healthcare services depends, correspond to general (overhead) costs directly and immediately linked to the overall economic activity of the taxable person, and hence, give rise to a right to deduct a proportion of the tax?

AG Opinion

Article 173(1) of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax,

must be interpreted as meaning that the costs incurred by a taxable person in connection with the acquisition of goods or services which, under the applicable national legislation, constitute the minimum technical and material equipment required for the pursuit of activities in respect of which value added tax (VAT) is not deductible (in the present case, healthcare services) do not, for that reason alone, correspond to general costs which have a direct and immediate link with that taxable person’s economic activity as a whole and therefore give rise to a right to a proportional deduction of VAT, including for the performance of a transaction in respect of which VAT is deductible that depends on the possession of a licence to engage in activities in respect of which VAT is not deductible, unless it is shown that those goods and services have a direct and immediate link with that taxable person’s economic activity as a whole.

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