General Court VAT Case – T-444/25 (Cavert) – Judgment – VAT Exemptions for Public Interest Activities within a VAT Group Require Individual Member Compliance

On June 10, 2026, the General Court issued its judgment in the case T-444/25 (Cavert).

Context: Reference for a preliminary ruling — Common system of VAT — Taxable persons — VAT group — Article 11 of Directive 2006/112/EC — Exemptions for certain activities in the public interest — Article 132(1)(b) and (g) of Directive 2006/112 — Services of a VAT group supplied by a member of that group which does not satisfy all the conditions for exemption

Summary

Fact Issues: The case involves a Dutch VAT group (“Fiscal Unity Stichting X”) providing care services for individuals with intellectual disabilities. Only one member of this group, a foundation, is officially recognized for VAT exemptions related to care and social services. Another member, Company Y, provides remote monitoring services to third parties, and the VAT group claimed exemption for these services, arguing that the exemption should apply at the group level if any member is recognized. [1]
Question: The core question referred to the General Court by the Hoge Raad der Nederlanden (Supreme Court of the Netherlands) is whether Article 11 (VAT group) read with Article 132(1)(b) and (g) (exemptions for public interest activities) of the VAT Directive means that exemptions only apply if the specific member supplying the services individually meets all exemption conditions, or if it’s sufficient for just one member of the VAT group to satisfy these conditions for the entire group to benefit. [1]
Decision: The General Court ruled that a VAT group can only rely on the exemptions for certain public interest activities (Article 132(1)(b) and (g) of the VAT Directive) if the specific member of the group providing the services to third parties itself satisfies all the conditions for those exemptions. This includes conditions related to the provider’s status as a duly recognized medical care establishment or a body recognized as having a social character.
Argumentation (Strict Interpretation of Exemptions): The Court emphasized that VAT exemptions are exceptions to the general principle of taxation and must be interpreted strictly. While Article 11 allows Member States to treat a VAT group as a single taxable person for administrative simplification and to prevent abuse, this does not extend to relaxing the specific conditions for exemptions under Article 132. [1]
Argumentation (Purpose of Exemptions and Fiscal Neutrality): The Court reasoned that the objectives of the exemptions in Article 132(1)(b) and (g) are linked to the public interest nature of the activities and the specific qualities of the service provider. Extending these exemptions to a member of a VAT group that does not individually meet the recognition criteria would undermine these objectives and violate the principle of fiscal neutrality, as it would create unjustified differential treatment compared to independent service providers.

Facts & Background

VAT Group Composition: The requesting party consists of five entities, including two foundations and three private limited companies, providing care for individuals with intellectual disabilities.
VAT Exemption Status: Only one foundation is officially recognized as an intramural care institution, exempting its services from VAT.
Central Question: The key issue is whether the services of the other group members are also exempt from VAT following a favorable ruling from the Court of Appeal.
Legal Challenge: The Secretary of State for Finance has contested the ruling, prompting the Supreme Court to seek clarification.
CJEU Referral: The Supreme Court has referred the matter to the CJEU to determine if all VAT group members must individually meet exemption criteria or if compliance by the recognized foundation is sufficient.

Articles in the EU VAT Directive

Article 11 and article 132(1)(b) and (g)

Article 11 (Taxable person – VAT grouping)
After consulting the advisory committee on value added tax (hereafter, the ‘VAT Committee’), each Member State may regard as a single taxable person any persons established in the territory of that Member State who, while legally independent, are closely bound to one another by financial, economic and organisational links.
A Member State exercising the option provided for in the first paragraph, may adopt any measures needed to prevent tax evasion or avoidance through the use of this provision.

Article 132
1. Member States shall exempt the following transactions:

(b) hospital and medical care and closely related activities undertaken by bodies governed by public law or, under social conditions comparable with those applicable to bodies governed by public law, by hospitals, centres for medical treatment or diagnosis and other duly recognised establishments of a similar nature;
(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;

Questions

1. Is Article 11 of the 2006 VAT Directive read in conjunction with Article 132(1)(b) and (g) of Regulation (EC) VAT Directive 2006 must be interpreted as meaning that the exemptions apply only to the extent that the provisions of the VAT group vis-à-vis third parties in return for remuneration shall be provided by a legally independent member of the VAT group which, viewed individually, satisfies all the conditions for application of these exemptions?
2. If Question 1 is in the negative, is answered is sufficient for the applicability of Article 132, points (b) and (g) of paragraph 1 and Article 133(a) of VAT Directive 2006 in respect of all the products referred to in those provisions services provided by the VAT group to third parties in return for remuneration, only one legally independent member of the VAT group satisfies the all the conditions for the application of those exemption provisions?

AG Opinion

None

Judgment

Article 132(1)(b) and (g) of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax, read in conjunction with Article 11 of that directive,

must be interpreted as meaning that:

a VAT group formed on the basis of Article 11 of that directive may rely on the exemptions provided for in Article 132(1)(b) and (g) of that directive only where the supplies of services concerned are supplied to third parties by a member of that group which itself satisfies all the conditions for the application of those exemptions, including those requiring the provider, where it is not a body governed by public law, to have the status of a medical care establishment duly recognised by the Member State concerned and of an organisation recognised by that State as having a social character.

Source

Curia

Reference to other ECJ Cases

Finanzamt für Körperschaften Berlin (C-868/19): This case clarifies that Article 11 of the VAT Directive aims to allow Member States to treat closely linked entities as a single taxable person for administrative simplification or to prevent tax avoidance, such as splitting a business to gain tax advantages.
Finanzamt T II (C-184/23): This judgment confirms that when a Member State implements a VAT group scheme under Article 11, the subordinate entities within that group are not considered separate taxable persons for VAT purposes.
Kaplan International Colleges UK (C-77/19): This case establishes that services supplied to or by a member of a VAT group are, for VAT purposes, considered to be supplied to or by the VAT group itself.
I (Exemption from VAT for hospital services) (C-228/20): This ruling emphasizes that terms used for VAT exemptions, especially those concerning the status of the service provider, must be interpreted strictly, as exemptions are exceptions to the general principle of VAT.
MOMTRADE RUSE (C-620/21): This case reiterates that the exemption under Article 132(1)(g) of the VAT Directive for social assistance and security services is subject to two cumulative conditions: the nature of the services and the status of the provider as a public body or a recognized social body.
Merck (292/82): This judgment highlights that the interpretation of a provision of EU law must consider not only its wording but also its context and the objectives of the regulation it belongs to.
Idealmed III (C-211/18): This case clarifies that the purpose of exemptions under Article 132(1)(b) and (g) is to exempt certain activities of general interest in healthcare and social assistance to facilitate access to these services by avoiding additional VAT costs.
Gregg (C-216/97): This ruling underscores the principle of fiscal neutrality, which dictates that traders performing the same transactions should not be treated differently regarding VAT collection.

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1. Executive Summary

The General Court has ruled that a VAT group can rely on the public interest exemptions provided in Article 132(1)(b) (hospitalization and medical care) and (g) (social assistance and security) of the VAT Directive only where the services concerned are supplied to third parties by a member of that group which itself satisfies all the conditions for the application of those exemptions. This includes conditions requiring the provider to have the status of a duly recognised medical care establishment or a body recognised as having a social character. The Court emphasized the strict interpretation of exemptions, the objectives behind such recognition, and the principle of fiscal neutrality.

2. Key Legal Provisions at Issue

Article 11 of Directive 2006/112/EC (VAT Directive): Allows Member States to treat legally independent but closely linked persons (financially, economically, and organisationally) as a single taxable person (a “VAT group”). The purpose is “administrative simplification or in order to avoid certain abuses such as the splitting of an undertaking.”
Article 132(1)(b) of the VAT Directive: Exempts “hospitalization and medical care and closely related operations provided by bodies governed by public law or, under social conditions comparable to those applicable to the latter, by duly recognised hospitals, medical and diagnostic care centres and other establishments of a similar nature.”
Article 132(1)(g) of the VAT Directive: Exempts “services and supplies of goods closely linked to social assistance and social security… carried out by bodies governed by public law or by other bodies recognised as having a social character by the Member State concerned.”
Article 133(a) of the VAT Directive: Allows Member States to make these exemptions for non-public bodies conditional on them “not having as their aim the systematic achievement of profit, provided that any profits are not distributed but are used for the continuance or improvement of the services supplied.”

3. Background of the Dispute (Main Proceedings)

The case originated from a request for a preliminary ruling by the Hoge Raad der Nederlanden (Supreme Court of the Netherlands) concerning a dispute between Fiscal Unity Stichting X et al. (a Dutch VAT group) and the State Secretary for Finance.

Fiscal Unity Stichting X is a VAT group comprising two foundations and three limited liability companies, all involved in providing care for individuals with intellectual disabilities.
Crucially, only one of the two foundations within the VAT group was duly recognised as an establishment for care purposes and as a body with a social character, satisfying the conditions for VAT exemption under Dutch law (transposing Article 132(1)(b) and (g) of the VAT Directive).
Company Y, one of the limited liability companies within the VAT group (and not the recognised foundation), provided remote monitoring services to intellectually disabled persons outside the group.
The VAT group initially paid VAT on Company Y’s services but then claimed an exemption, arguing that because it was part of a VAT group and another member was recognised, the services provided by Company Y should also be exempt.
The Dutch tax administration rejected this claim, arguing that Company Y itself did not meet the recognition conditions. The case reached the Supreme Court, which sought clarification from the General Court.

The referring court specifically questioned whether the “single taxable person” concept of a VAT group (Article 11) implies that exemption conditions (Article 132(1)(b) and (g)) need only be met by one member for the entire group to benefit, even if the services are rendered by a non-qualifying member.

4. Main Issues and Court’s Reasoning

The General Court addressed the core question of whether the exemptions under Article 132(1)(b) and (g) apply only if the services are supplied by a legally independent member of the VAT group who, considered individually, satisfies all the conditions for those exemptions.

Nature and Purpose of VAT Groups (Article 11):
- The Court reiterated that Article 11 allows Member States to treat legally independent entities as a “single taxable person” for VAT purposes, aiming for “administrative simplification or in order to avoid certain abuses.”
- A member of a VAT group “cannot, on an individual basis, be regarded… as a taxable person separate from the taxable person constituted by the VAT group.” Consequently, services supplied by a member to a third party are considered to be supplied by the VAT group itself.
Distinction Between “Taxable Person” Status and Exemption Conditions:
- The Court clarified that while a VAT group acts as a single taxable person, “the fact that a person belonging to a VAT group cannot be regarded, on an individual basis, as a taxable person separate from the taxable person constituted by the VAT group does not preclude a determination of whether that person satisfies the conditions concerning the status of an economic operator providing the services referred to in Article 132(1)(b) and (g).”
- The objectives of Article 11 (administrative simplification, anti-abuse) “do not militate in favour of extending to a VAT group the benefit of the exemptions at issue which, without the existence of the VAT group, would not be applicable, as regards the supply of services to third parties by one of its members, which does not satisfy the necessary conditions.”
Strict Interpretation of Exemptions (Article 132):
- The Court emphasised the established case-law: “the terms used to designate the VAT exemptions referred to in that provision… must be interpreted strictly, since those exemptions constitute exceptions to the general principle that each service supplied for consideration by a taxable person is subject to that tax.”
- The wording of Article 132(1)(b) and (g) explicitly refers to exemptions for services performed by “establishments” or “bodies” that are “duly recognised.” This “literal interpretation… militates in favour of the assessment of the conditions relating to the quality of the provider of the relevant services taking into account the person who supplies them as a member of a VAT group.”
Context and Objectives of Public Interest Exemptions:
- The exemptions in Article 132 are found in the chapter “Exemptions for certain activities in the public interest.” The “public interest nature of the transactions” is the determining factor.
- The requirement for “recognition” (as a medical establishment or social character body) allows Member States “to ensure that only establishments and bodies which pursue activities corresponding to the purposes of each of those provisions benefit from such an exemption.”
- Allowing a non-recognised member to benefit, even if another member is recognised, would “compromise” these objectives. Such an interpretation “would be incompatible with their purpose.”
Principle of Fiscal Neutrality:
- Extending the exemption to a non-qualifying member of a VAT group would violate the principle of fiscal neutrality, which “precludes, inter alia, traders who carry out the same transactions from being treated differently in relation to the collection of VAT.”
- If Company Y’s services were exempt due to its VAT group membership, while a stand-alone, non-recognised entity providing identical services would be taxed, this would constitute “different and unjustified treatment.”

5. Decision / Conclusion

The General Court concluded its ruling by stating:

“Article 132(1)(b) and (g) of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax, read in conjunction with Article 11 of that directive, must be interpreted as meaning that: a VAT group formed on the basis of Article 11 of that directive may rely on the exemptions provided for in Article 132(1)(b) and (g) of that directive only where the supplies of services concerned are supplied to third parties by a member of that group which itself satisfies all the conditions for the application of those exemptions, including those requiring the provider, where it is not a body governed by public law, to have the status of a medical care establishment duly recognised by the Member State concerned and of an organisation recognised by that State as having a social character.”

Given this answer to the first question, the Court determined there was no need to answer the second question, which concerned the application of Article 133(a) (profit-making condition).

6. Implications

This judgment clarifies that while a VAT group functions as a single taxable person for general VAT purposes, this legal fiction does not automatically extend the specific qualifications required for certain public interest exemptions (like those for medical care or social assistance) to all its members. Each individual member providing the services must independently meet the stringent conditions, particularly those relating to the provider’s status and recognition, for the exemption to apply to their specific supplies to third parties. This ruling reinforces the strict interpretation of VAT exemptions and upholds the principle of fiscal neutrality.