On April 28, 2022, the ECJ issued its decision in the case C-612/20 (Happy Education).
Context: Reference for a preliminary ruling — Value added tax (VAT) — Directive 2006/112/EC — Article 132(1)(i) — Exemptions in favor of certain activities in the general interest — Exemptions linked to the education of childhood or youth, school or university education – Provision of educational services complementary to the school program – Organization governed by private law providing these services for commercial purposes
Article in the EU VAT Directive
Articles 132(1)(i), 133 and 134 of the EU VAT Directive 2006/112/EC
Article 132 (Exemption)
1. Member States shall exempt the following transactions:
(i) the provision of children’s or young people’s education, school or university education, vocational training or retraining, including the supply of services and of goods closely related thereto, by bodies governed by public law having such as their aim or by other organisations recognised by the Member State concerned as having similar objects;
Article 133 (Exemption)
Member States may make the granting to bodies other than those governed by public law of each exemption provided for in points (b), (g), (h), (i), (l), (m) and (n) of Article 132(1) subject in each individual case to one or more of the following conditions:
(a) the bodies in question must not systematically aim to make a profit, and any surpluses nevertheless arising must not be distributed, but must be assigned to the continuance or improvement of the services supplied;
(b) those bodies must be managed and administered on an essentially voluntary basis by persons who have no direct or indirect interest, either themselves or through intermediaries, in the results of the activities concerned;
(c) those bodies must charge prices which are approved by the public authorities or which do not exceed such approved prices or, in respect of those services not subject to approval, prices lower than those charged for similar services by commercial enterprises subject to VAT;
(d) the exemptions must not be likely to cause distortion of competition to the disadvantage of commercial enterprises subject to VAT.
Member States which, pursuant to Annex E of Directive 77/388/EEC, on 1 January 1989 applied VAT to the transactions referred to in Article 132(1)(m) and (n) may also apply the conditions provided for in point (d) of the first paragraph of this Article when the said supply of goods or services by bodies governed by public law is granted exemption.
Article 134 (Exemption)
The supply of goods or services shall not be granted exemption, as provided for in points (b), (g), (h), (i), (l), (m) and (n) of Article 132(1), in the following cases:
(a) where the supply is not essential to the transactions exempted;
(b) where the basic purpose of the supply is to obtain additional income for the body in question through transactions which are in direct competition with those of commercial enterprises subject to VAT.
Facts
- The applicant is a commercial company that offers after-school services, consisting in organizing additional activities on it educational curriculum. The main activities fall under the CAEN code 8559, ‘Other forms of education not classified elsewhere’. The services of applicant consist of homework assistance, educational programs, courses foreign languages and crafts, sports activities, transport from school and meals.
- The children participating in the Happy Education programs are enrolled at various educational institutions in Cluj-Napoca. The activities carried out by the applicant are identical to those of the program ‘School after school’ as regulated in the method of September 7, 2011, approved by Order No. 5349/2011 of the Minister of Education, Research, Youth and Sports.
- Following an inspection by the defendant, Administrația Județeană a Finanțelor Publice Cluj, from April 16 to April 20, 2018, to check how was fulfilled the VAT obligations for the period from 1 August 2016 up to and including December 31, 2017, the defendant issued a tax audit report and an assessment established.
- In these two transactions it is mainly determined that the turnover for July 2016 was higher than the upper limit for VAT exemption of RON 220,000 in accordance with Article 310 (1) of the Cod fiscal, and that the applicant therefore submits had to register for VAT from 1 August 2016. On that ground are chargeable additional payment obligations for an amount of RON 89 472 in VAT, corresponding to a taxable amount of 383 066 RON.
- Defendant, Direcția Generală Regională a Finanțelor Publice Cluj-Napoca, has the applicant’s objection to these acts was rejected by a decision on the objection
- In view of this, the applicant submitted to the referring party on 12 March 2019 court brought an action for annulment of acts taken by defendants towards her.
Questions
1. Must Articles 132 (1) (i), 133 and 134 .. be interpreted as meaning that educational services such as those included in the national „School after school program, are covered by the concept of services which are closely related with school education ‘if those services are such as in the main proceedings performed by a private entity for profit, without one cooperation has been agreed with an educational institution?
2. If the first question is answered in the affirmative, acknowledgment of the applicant as a ‘body with similar purposes’ within the meaning of Article 132, paragraph 1 (i) .. than arise from national legal regulations concerning authorization of activities under CAEN code 8559 “Other forms of education not classified elsewhere ”by the Oficiu Nauional al Registrului Comerțului (Commercial Register, Romania), or are established under reference to the public interest of additional educational activities with the goal of preventing school dropout, improving school performance, corrective education, accelerated learning, personal and social development integration?
AG Opinion
None
Decision
Article 132(1)(i) 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 concept of an ‘organisation recognised as having similar objects’ to those of an educational body governed by public law, for the purposes of that provision, does not cover a private entity which carries out teaching activities in the public interest consisting of, inter alia, the organisation of activities supplementing the school curriculum, such as homework support classes, educational programmes and foreign language classes, and which has obtained authorisation from the National Trade Register Office in the form of the attribution of the CAEN code 8559 – ‘Other education n.e.c.’, within the meaning of the Classification of National Economic Activities, where that entity does not, in any event, satisfy the conditions under national law for obtaining such recognition.
Source
Similar ECJ cases
- C-434/05 (Horizon College) – A teacher providing education on a temporary basis may constitute a VAT-exempt transaction
- C-445/05 (Haderer) – A freelancer providing assistance with schoolwork and running ceramics and pottery courses in adult education centres can be exempted from VAT
- C-319/12 (MDDP) – VAT borne in relation to exempt (educational) transactions is not deductible
- C-449/17 (A & G Fahrschul-Akademie GmbH) – Motor vehicle driving tuition provided by a driving school is not VAT exempted
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