Hospice performance does not qualify as exempt service or short stay

Services provided by hospices not exempt but taxed at a general rate

The Arnhem-Leeuwarden Court of Appeal ruled that the services provided by low-care hospices (or ‘almost-home-homes’) for terminal patients are considered a single composite service, which includes room rental, meals, and general support, and is not exempt from VAT.
The Court concluded that these hospice services do not qualify for medical or social exemptions under the VAT Act, as they do not meet the criteria for medical care nor possess formal recognition as a social institution.
As a result, the services are subject to the general VAT rate, allowing the hospices to fully deduct input tax on renovation costs associated with their buildings.

Hospice performance does not qualify as exempt service or short stay

Court Ruling on VAT Status: The Arnhem-Leeuwarden Court of Appeal determined that Stichting X’s hospice service does not qualify as an exempt service or short stay, thus allowing X to reclaim VAT on renovation and furnishing costs.
Service Composition: The court identified that the hospice service comprises the use of rooms, food and drink, and general care, which collectively form an indivisible service rather than independent components, leading to the decision on VAT classification.
Exemption Criteria Not Met: The hospice was found not to meet the criteria for VAT exemption, as it lacks hospital and medical care and is not recognized as a social or cultural institution, resulting in a 21% VAT tax on its services.

Hospice services taxed at standard VAT rate

Indivisible Service: The court ruled that the hospice provides a single, indivisible service to its guests, which includes the provision of a room, meals, and general care. These elements are so interconnected that separating them would be artificial, emphasizing the hospice’s role in providing a supportive environment for guests in their final stages of life.
VAT Obligations: The hospice’s services do not qualify for VAT exemptions under the applicable laws, as they cannot be classified as hospital care or recognized social services. Consequently, the hospice is subject to the standard VAT rate of 21% instead of any reduced rate associated with short stays.
Tax Refunds Granted: The court overturned the tax office’s refusal to grant VAT deductions, allowing the hospice to reclaim VAT for previous periods, including a refund of €29,341 for 2019 and €5,649 for four quarters of 2020, along with an order for the tax office to pay €6,122.25 in legal costs.