On December 1st, 2006, the ECJ issued its decision in the case C-394/04 (Ygeia).
Context: Sixth VAT Directive – Article 13A(1)(b) – Exemptions – Activities closely related to hospital and medical care – Provision of telephone services and hiring out of televisions to in-patients – Provision of beds and meals to persons accompanying in-patients.
Article in the EU VAT Directive
Article 13(A)(1)(b) of the Sixth VAT Directive (Article 132(1)(b) of the EU VAT Directive 2006/112/EC)
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;
Facts
- Following an audit of Ygeia’s accounts for the taxation periods corresponding to the years 1992 and 1993, the Dimosia Ikonomiki Ipiresia Forologias Anonimon Emporikon Etairion Athinon considered that the income earned by this company from, firstly, the provision of telephone services and the hiring out of televisions to in-patients and, secondly, the provision of beds and meals to persons accompanying them should be subject to VAT on the ground that those services could not be considered to be activities closely related to hospital and medical care. Consequently, it adjusted the company’s tax liability by two separate decisions relating to each of the two years at issue.
- Ygeia brought applications against those decisions before the Diikitiko Protodikio Athinon (Administrative Court of First Instance, Athens), then, on appeal, before the Diikitiko Efetio Athinon (Administrative Appeal Court, Athens). In support of those applications, Ygeia claimed that the services at issue contribute to patient care and to maintenance of patients’ social contacts and, consequently, help to hasten their recovery by creating favourable conditions from a psychological point of view. These applications were dismissed on the ground that since the services at issue are intended to facilitate patients’ hospital stays and do not contribute to their care, they cannot be considered closely related to hospital care.
- Ygeia appealed to the Simvoulio tis Epikratias (Council of State) against the judgments given by the Diikitiko Efetio Athinon.
- In its orders for reference the Simvoulio tis Epikratias states that it is common ground that Ygeia, as a legal person governed by private law, satisfies the conditions for exemption from VAT as regards hospital and medical care and closely related activities. According to it, the only issue to be examined relates to whether the services at issue fall within the concept of ‘activities closely related’ to hospital and medical care.
- The referring court points out that that concept is not defined in Article 13A(1) of the Sixth Directive. It notes, however, that, on the basis of the conditions laid down in Article 13A(2)(b) of that directive, it could be considered that a transaction is closely related to hospital and medical care where, firstly, it is essential to the transactions exempted and, secondly, its purpose is not to obtain additional income for the person carrying out the exempted transactions. It adds, moreover, that, in its judgment in Case C-45/01 Dornier [2003] ECR I-12911, paragraphs 33 to 35, the Court held that the question as to whether an activity falls within the concept of ‘closely related activities’ depends on whether it is ancillary in nature. That means that it must be determined whether the service is provided to the recipients as a means of enhancing the enjoyment of other services or constitutes for them an end in itself.
Questions
Do services supplied by persons referred to in Article 13A(1)(b) of [the Sixth Directive] comprising the grant of use of a telephone and a television to patients and the provision of food and a bed to persons accompanying patients come under activities closely related to hospital and medical care, within the meaning of that provision, as activities ancillary to that care but also essential to it?
AG Opinion
Article 13A(1)(b) 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 supply by a hospital of telephone services and a television set to an in‑patient and the supply by it of meals and a bed to persons accompanying him constitute activities closely related to hospital and medical care pursuant to that provision only if the provision of those facilities to the patient or the permanent presence of a close relative at his side are prescribed by a doctor.
Decision
1. The supply of telephone services and the hiring out of televisions to in-patients by persons covered by Article 13A(1)(b) 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, and the supply by those persons of beds and meals to people accompanying in-patients do not amount, as a general rule, to activities closely related to hospital and medical care within the meaning of that provision. It can be otherwise only if those supplies are essential to achieve the therapeutic objectives sought by the hospital and medical care and their basic purpose is not to obtain additional income for the supplier by carrying out transactions which are in direct competition with those of commercial enterprises liable for value added tax.
2. It is for the referring court, taking account of all of the specific facts in the litigation before it and, if appropriate, of the content of the medical prescriptions drawn up for the patients concerned, to determine whether the services supplied satisfy those conditions.
Summary
The provision of telephones and the rental of television sets to hospital patients by the persons referred to in Article 13A(1)(b) of the Sixth Directive, as well as the supply of beds and meals to their carers by such persons are not, as a rule, acts which closely related to hospital and medical care. This can only be otherwise if these services are indispensable for the achievement of the therapeutic objectives of hospital nursing and medical care and they are not mainly intended to provide the person providing them with additional income by performing acts performed in direct competition with those of commercial undertakings subject to VAT.
It is for the referring court to determine, taking into account all the specific elements of the disputes before it and, where appropriate, the content of the medical prescriptions drawn up for the patients concerned, whether the services provided satisfy those conditions.
Source
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