Comments on C-379/24 & C-380/24 – Judgment disallows restrictions ensuring legal certainty for exemptions

A grupació de Neteja Sanitaria AIE (C-379/24) and Educat Serveis Auxiliars SCCL (C‑380/24) – Judgment – whether cost sharing exemption applies to cleaning services provided by a group of persons carrying on an exempt activity in hospitals / healthcare and education settings

VAT Cost Sharing Exemption Overview: The Court of Justice of the European Union (CJEU) addressed cases involving A grupació de Neteja Sanitaria AIE and Educat Serveis Auxiliars SCCL, focusing on the application of the VAT cost sharing exemption (CSE) under Article 132(1)(f). This exemption allows groups providing services necessary for exempt activities to share costs without VAT, provided they meet statutory conditions.
Direct Necessity of Services: The CJEU ruled that the services provided by an independent group do not need to be essential or exclusive to the exempt activity. It confirmed that general services like cleaning can be classified as “directly necessary” for the healthcare and education sectors due to their hygiene requirements, thus qualifying for the exemption even if they are not exclusively linked to the exempt activity.
Distortion of Competition Consideration: The Court rejected the notion that the general nature of services automatically implies a risk of competition distortion, emphasizing that such a requirement would unfairly limit the scope of the exemption. It stated that refusing the exemption solely based on the potential for services to be used in taxable activities would contradict the directive’s intent, as long as the group meets all conditions laid out in Article 132(1)(f).

Source KPMG

Exemption for General Services: The Court of Justice of the European Union (CJEU) ruled that general services, such as cleaning, can qualify for the umbrella exemption under Article 132(1)(f) of the VAT Directive if they are necessary for the exempt activity, regardless of national requirements for exclusivity.
Compatibility with EU Law: The CJEU determined that Spanish legislation’s strict conditions, which required services to be used “directly and exclusively” for exempt activities, conflict with EU law. It clarified that services do not need to be indispensable or specifically tailored to qualify as “directly necessary.”
Assessment of Competition Distortion: The ruling emphasized that member states cannot automatically presume that general services disrupt competition. Instead, any assessment of competition distortion must be concrete and not based on an irrebuttable presumption, reinforcing the need for a case-by-case evaluation.

Source BTW Jurisprudentie

VAT exemption for cleaning services provided by a group to members

VAT Exemption Denial Contradicts EU Law: The Court of Justice of the European Union (CJEU) ruled that Spain’s refusal to grant a VAT exemption for cleaning services is incompatible with EU law, emphasizing that the general nature of these services does not negate their eligibility for the exemption.
General Nature of Services Irrelevant: The CJEU clarified that the cleaning services provided by Agrupació de Neteja Sanitària and Educat Serveis Auxiliars do not need to be exclusively linked to the exempt main activities (healthcare and education) to qualify for VAT exemption, making their general applicability irrelevant.
Competition Distortion Argument Rejected: The Court found that Spain’s assertion that cleaning services could lead to distortions of competition is also contrary to EU law, as these services, by their nature, can support both taxable and exempt activities, thus not warranting an automatic assumption of competitive distortion.

Source Taxlive