ECJ VAT C-513/24 (Oblastní nemocnice Kolín) – Judgment – Regulatory requirement alone insufficient for pro-rata VAT deduction for hospital equipment

On March 19, 2026, 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: Regional Hospital Kolín (Czech Republic) provides both VAT-exempt health services and VAT-deductible “additional services.” The hospital claimed a pro-rata VAT deduction for technical and material equipment required by national law for providing health services, arguing these costs are general overheads necessary for its overall economic activity. The Czech tax authorities partially denied this deduction, stating the equipment was primarily for non-deductible health services.
Question to the Court: The Czech Supreme Administrative Court asked the CJEU if Article 173(1) of the VAT Directive means that costs for minimum technical equipment, required by national law for providing non-deductible health services but also used for deductible services, should be considered indirect general costs, thereby allowing a pro-rata VAT deduction. The core question was whether a regulatory requirement alone could establish a direct and immediate link to the taxable person’s economic activity as a whole for proportionate deduction.
Decision: The Court ruled that Article 173(1) of the VAT Directive must be interpreted as meaning that costs incurred for acquiring goods and services required by national legislation for providing VAT-exempt health services, even if also used for VAT-deductible services, do not, solely due to that regulatory requirement, constitute general costs giving rise to a pro-rata VAT deduction.
Justification (Part 1 – General Principles): The Court reiterated that a direct and immediate link between input and output transactions is generally necessary for VAT deduction. While costs forming part of a taxable person’s general expenses can also be deductible, having a “direct and immediate link with the taxable person’s economic activity as a whole,” the existence of a regulatory obligation to purchase goods or services does not, by itself, suffice to establish such a link. The objective relationship between transactions, or the activity as a whole, is decisive.
Justification (Part 2 – Application to the Case): The Court emphasized that it is for the national court to assess, based on all relevant circumstances (including the actual use of the equipment), whether each piece of equipment has a direct and immediate link to specific downstream taxable transactions or, failing that, to the hospital’s overall economic activity as general costs. The Court clarified that if equipment is exclusively for exempt services, no deduction is allowed; if used for both exempt and taxable services, a pro-rata deduction determined by Articles 174 and 175 of the VAT Directive would apply.

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.

Decision

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 for the acquisition of goods and services required by national legislation for the provision of health services in respect of which VAT is not deductible, but also used in the exercise of benefits in respect of which VAT is deductible, do not, by reason of that regulatory requirement alone, constitute general costs in respect of which VAT is deductible on a pro rata basis.

Source

Curia

Reference to other ECJ Cases

Iberdrola (C‑132/16) – Input VAT deductible only where costs have a direct and immediate link with taxable outputs or overall taxable activity.
Amper Metal (C‑334/20) – VAT deductibility depends on objective connection with economic activity, not on usefulness, profitability, proportionality, or regulatory necessity.
Investrand (C‑435/05) – Costs qualify as general overheads only if directly linked to the taxable person’s overall economic activity.
C (Insolvency administrators) (C‑696/22) – Determination of deductibility must rely on objective content, actual use, and circumstances of transactions.
Finanzamt R (C‑98/21) – No input VAT deduction where costs are directly linked to VAT‑exempt downstream activities, not general expenses.
Becker (C‑104/12) – Direct and immediate link must be assessed objectively; subjective intent or regulatory context is insufficient.
Celestri (C‑172/84) – In preliminary rulings, factual assessment belongs to national courts; the ECJ provides legal interpretation only.
MOTOE (C‑49/07) – The ECJ may guide interpretation of EU law but cannot reassess facts or evidence.
Amazon Services Europe (C‑665/22) – Confirms cooperative limits of Article 267 TFEU and separation of roles between ECJ and national courts.