ECJ C-581/19 (Frenetikexito vs. PT) AG Opinion – Absorption: dietary advice exempt, or ancillary to physical exercise?

Article in the EU VAT Directive

Article 132(1)(c) of Directive 2006/112/EC

Facts

• The applicant is a company that is involved in the management and operation of sports institutions, welfare and fitness activities, foodstuffs and dietetic food.
• The applicant offers programs that only include fitness services, and programs that also include nutritional advice.
• It was up to the customer to choose the desired plan.
• When the customer subscribed to the food service, it was charged regardless of whether the customer made use of it (the applicant paid no VAT on this).
• The applicant stated on the invoices issued the respective amounts for the fitness service and nutritional advice.
• After a tax audit, the tax authorities have issued additional tax assessments for the applicant for the years 2014 and 2015 (€ 12,253.05).
• The tax authorities state that the applicant should have paid VAT for the food services.
• The dietary advice would be secondary to physical exercise, since the client pays for it whether or not he uses it.
• The tax authorities ask the Court to refer questions for a preliminary ruling in order to determine: (i) whether the manner in which the applicant draws up its invoices amounts to an artificial division of services, and (ii) whether the VAT exemption can be applied for health-related activities to food consultation services that have never been performed.

The dispute concerns whether the food service provided by the applicant is ancillary  to the fitness service provided by the applicant, as a result of which the two services together form a single service or, on the other hand, separate and independent services. If it is judged that the food service is subordinate to the fitness service, that food service will receive the same tax treatment as the fitness service and will therefore be subject to VAT. If, on the other hand, it is judged that this service constitutes an independent service, this service will be exempt from VAT. In that case, it must be determined whether it is necessary for the service to actually be provided or whether it is sufficient for the service to be offered.

Question

Where, as occurs in this case, a company

(a)    carries on, principally, fitness and physical well-being activities and, on a secondary basis, human health activities, which include nutrition services, nutrition/dietary advice, fitness assessment services and massages; and

(b)    offers its customers plans that include only fitness services and plans that include nutrition services in addition to fitness services,

for the purposes of Article 2(1)(c) of Directive 2006/112/EC of 28 November 2006, ¹ must the human health activity, and the nutrition service in particular, be regarded as ancillary to the fitness and physical well-being activity, with the effect that the ancillary supply must be given the same tax treatment as the principal supply, or, on the contrary, must the human health activity, and the nutrition service in particular, be regarded as independent of and distinct from the fitness and physical well-being activity, with the effect that the tax treatment established for each of those activities will apply to that activity?

2.    For the purposes of applying the exemption under Article 132(1)(c) of Directive 2006/112/EC of 28 November 2006, must the services listed in that article actually be supplied, or is it sufficient in order for that exemption to apply that they are merely made available, so that use of those services depends solely on the wishes of the customer?

AG Opinion

Even though the Court has dealt with similar issues a number of times, in the view of the referring court clear criteria for assessing such bundles of supplies cannot be inferred from the Court’s existing case-law. These proceedings therefore also give the Court an opportunity to clarify the criteria governing the VAT treatment of bundles of supplies. This could make it easier for specialised national courts to decide, with legal certainty and autonomy, whether there is a single complex supply, a dependent ancillary supply or two (principal) supplies that are to be treated distinctly.

1. Where a taxable person supplies nutrition, fitness and physical well-being services, as in the present case, they are independent and distinct supplies for the purposes of Directive 2006/112/EC.
2. A nutrition advice service as in the present case is an exempt supply consisting in provision of medical care for the purposes of Article 132(1)(c) of Directive 2006/112/EC at best if it pursues a therapeutic aim. It is for the referring court to determine whether that is the case.

Source 

Curia