On July 6, 2006, the ECJ issued its Order in the joined cases C-18/05 & C-155/05 (Villa Maria Beatrice Hospital).
Context: Second paragraph of Article 104(3) of the Rules of Procedure – Sixth VAT Directive – Article 13B(c) – Exemptions – Supplies of goods used wholly for an exempted activity which do not give rise to a right of deduction
Article in the EU VAT Directive
Article 13B(c) of the Sixth VAT Directive. (Articles 136(a), 136(b) of the EU VAT Directive 2006/112/EC)
Article 136 (Exemption)
Member States shall exempt the following transactions:
(a) the supply of goods used solely for an activity exempted under Articles 132, 135, 371, 375, 376 and 377, Article 378(2), Article 379(2) and Articles 380 to 390c, if those goods have not given rise to deductibility;
(b) the supply of goods on the acquisition or application of which VAT was notdeductible, pursuant to Article 176.
Facts
Case C‑18/05
- The Casa di cura privata Salus SpA (‘Salus’) is an establishment providing healthcare, which carries out those activities within the framework of agreements concluded with the Servizio Sanitario Nazionale (National Health Service). Those activities are exempt from VAT under of the national rules which transposed Article 13A(1)(b) of the Sixth Directive.
- Arguing that Article 13B(c) of the Sixth Directive also requires Member States to exempt supplies of goods used wholly for exempt activities, Salus claimed reimbursement from the Agenzia Entrate – Ufficio di Napoli 4 (Public Revenue Office Naples 4) of the sum of ITL 2 880 535 000 (EUR 1 487 672.17) that it had paid in respect of VAT in the years 1998, 1999 and 2000. Following the implied rejection of its claim by the tax administration, Salus brought an action on 13 March 2003 before the Commissione tributaria provinciale di Napoli (Regional Tax Court, Naples).
- The national court refers to divergences in Italian case-law concerning the application of the exemption provided for in Article 13B(c) of the Sixth Directive in respect of supplies of goods used for exempt activities.
- The majority of cases interpret that provision as laying down an exemption of an objective nature, applicable merely upon the goods acquired being used for exempt activities, so that claims for reimbursement of undeducted tax in cases similar to the case in these proceedings are upheld.
- However, according to a minority trend in the case-law to which the national court adheres, that provision refers only to the exemption of the sale of goods by taxpayers who do not enjoy a right of deduction because their activity is exempt, since the goods sold were intended to be used exclusively for an exempt activity.
- In those circumstances, the Commissione tributaria proviciale di Napoli decided to stay the proceedings and to refer the following questions to the Court for a preliminary ruling:
- 1. Does the exemption under Article 13B(c) of [the Sixth Directive] refer to input VAT paid on the acquisition of goods or services used for exempted activities or rather to cases in which a taxable person who has acquired goods intended for such activities subsequently sells those goods to other persons?
- 2. Is that provision sufficiently precise and unconditional to be directly effective in the national legal system?
- 3. For the purposes of the direct applicability of the directive, what is the effect of the requirement in [Article 13B] whereby, in implementing [the rules in Article 13B(c)], Member States are to lay down conditions for “preventing any possible evasion, avoidance or abuse”?’
Case C-155/05
- On 16 September 2002, Villa Maria Beatrice Hospital Srl (‘VMB Hospital’) brought nine claims for reimbursement before the Agenzia Entrate – Ufficio di Firenze 1 (Public Revenue Office Florence 1), first, for the sum of EUR 1 799 779.46, together with interest accrued and accruing in respect of VAT unduly paid in the years 1998 to 2000, and, second, for the total sum of EUR 1 987 090.64 paid in respect of VAT in the years 1992 to 1997. Since those claims were the subject of implied decisions of rejection, VMB Hospital brought an action on 15 April 2003 before the Commissione tributaria provinciale di Firenze (Regional Tax Court, Florence).
- VMB Hospital submitted that its main activity consists of supplying hospital treatment and medical care under a system of accreditation by the Servizio Sanitario Nazionale, which is an activity exempt from VAT under the national rules which transposed Article 13 A(1)(b) of the Sixth Directive.
- VMB Hospital submitted, in particular, that the supplies of goods used wholly for the activities referred to in Article 13 of the Sixth Directive have not been exempted by the Italian legislature, so that it was unable to deduct fully the VAT for the supplies concerned in the years 1992 to 2000. Furthermore, VMB Hospital submitted that LD 313/1997, adopted after the judgment in Case C‑45/95 Commission v Italy [1997] ECR I-3605, did not fully transpose the Sixth Directive into national law.
- By judgment of 3 December 2003 to 19 January 2004, the Commissione tributaria provinciale di Firenze upheld the action.
- On 20 May 2004 the Agenzia Entrate – Ufficio di Firenze 1 brought an appeal against that judgment before the referring court, submitting, inter alia, that the court of first instance had wrongly interpreted Article 13B(c) of the Sixth Directive.
- The referring court takes the view that the amendment to Article 10 of DPR 633/1972 by LD 313/1997 does not introduce a general exemption for all goods used wholly for an exempt activity or excluded from the right to deduction, as set out in the judgment Commission v Italy, but limits the exemption to supplies relating to goods acquired or imported without a right of full deduction of the tax on them. The exemption therefore concerns only goods acquired with non-deductible VAT, used for exempt activities and subsequently resold.
Questions
Is paragraph 27d of Article 10 of Presidential Decree No 633 of 26 October 1972 compatible with subparagraph (c) of Article 13B (‘Other exemptions’) of Sixth Council Directive 77/388/EEC of 17 May 1977?
AG Opinion
None
Decision
The first part of Article 13B(c) of Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes – Common system of value added tax: uniform basis of assessment, must be interpreted as meaning that the exemption for which it provides applies only to the resale of goods previously acquired by a taxable person for an exempted activity under that article, in so far as the VAT paid upon initial acquisition of the goods in question was not deductible.
Summary
The first part of Article 13B(c) of the Sixth Directive must be interpreted as meaning that the exemption provided for therein applies only to the resale of goods previously acquired by a taxable person for the purpose of an activity exempt under that article, in so far as no right to deduct input tax was enjoyed in respect of the VAT paid on the first acquisition of those goods.
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