Case C‑228/20

I GmbH

v

Finanzamt H

(Request for a preliminary ruling from the Niedersächsisches Finanzgericht)

Judgment of the Court (Second Chamber), 7 April 2022

(Reference for a preliminary ruling – Common system of value added tax (VAT) – Directive 2006/112/EC – Article 132(1)(b) – Exemptions for certain activities in the public interest – Exemption for hospital and medical care – Private hospital – Duly recognised establishment – Comparable social conditions)

1. Harmonisation of fiscal legislation – Common system of value added tax – Exemptions – Exemptions for certain activities in the public interest – Exemption for hospital and medical care and closely related activities – Duly recognised establishments – Concept – Private hospitals – Included

   (Council Directive 2006/112, Arts 132(1)(b) and 133)

   (see paragraphs 48-52, 55-60)

2. Harmonisation of fiscal legislation – Common system of value added tax – Exemptions – Exemptions for certain activities in the public interest – Exemption for hospital and medical care and closely related activities – Duly recognised establishments – Factors to be taken into account for the purpose of recognition of establishments – Member States’ discretion – Limit – Compliance with the principle of fiscal neutrality

   (Council Directive 2006/112, Art. 132(1)(b))

   (see paragraphs 61-63)

3. Harmonisation of fiscal legislation – Common system of value added tax – Exemptions – Exemptions for certain activities in the public interest – Exemption for hospital and medical care and closely related activities – Provision of care by private hospitals – Supply of similar services under social conditions comparable with those applicable to bodies governed by public law – National legislation which results in different treatment as regards the exemption – Not permissible

   (Council Directive 2006/112, Art. 132(1)(b))

   (see paragraph 70, operative part 1)

4. Harmonisation of fiscal legislation – Common system of value added tax – Exemptions – Exemptions for certain activities in the public interest – Exemption for hospital and medical care and closely related activities – Provision of medical care by private hospitals – Supply of similar services under social conditions comparable with those applicable to bodies governed by public law – Determination of whether social conditions are comparable – Factors to be taken into consideration

   (Council Directive 2006/112, Art. 132(1)(b))

   (see paragraph 75- 83, operative part 2)

Résumé

I GmbH is a company incorporated under German private law whose corporate purpose is, inter alia, the operation of a hospital in the field of neurology. With the approval of the State, it supplies hospital services, within the meaning of German law, to patients covered by various systems for the purpose of meeting their medical expenses, including private or statutory health insurance schemes. Those patients are each treated following confirmation that their expenses would be covered by the ‘Beihilfe’ services (aid paid to public servants in the event of illness), a health insurance fund, a substitute fund or private insurance.

In its tax returns for the 2009 to 2012 financial years, I treated the hospital services invoiced on the basis of fixed-rate fees and the user fees charged to non-resident doctors as transactions exempt from value added tax (VAT).

Under EU law, ( 1 ) hospital services supplied by bodies governed by public law or, under social conditions comparable with those applicable to bodies governed by public law, by hospitals and other duly recognised establishments of a similar nature are exempt from VAT. ( 2 ) The German law transposing the VAT Directive provides that hospital services supplied by bodies governed by public law are exempt from VAT and that hospitals other than bodies governed by public law may also qualify for that exemption, in respect of the same services, if they are approved under national law either because they are included in a Land-level hospital plan or because they have concluded care supply contracts with the statutory health insurance or substitute funds.

In the present case, prior to 1 July 2012, I was not regarded as an approved hospital within the meaning of German law. However, since it had concluded a framework agreement with an accident insurance fund which entered into force on that date, I could rely on the exemption for hospital services provided after that date.

Before the referring court, I challenged the decision of the tax office, which took the view that most of the services supplied before 1 July 2012 should not be exempt from VAT. According to I, those services are exempt from VAT under the VAT Directive.

The referring court considers that the system applicable in Germany to services supplied by hospitals other than bodies governed by public law may lead to similar services being treated differently. In those circumstances, it asks the Court of Justice whether it is compatible with the VAT Directive to subject the exemption of medical care provided by a private hospital to that hospital being approved in accordance with the national provisions relating to the general health insurance regime and, if not, what factors determine whether the services provided by such private hospitals are supplied under ‘social conditions comparable with those applicable to bodies governed by public law’, within the meaning of the VAT Directive.

In its judgment, the Court rules that the VAT Directive precludes national legislation which results in private hospitals that supply similar services under social conditions comparable with those applicable to bodies governed by public law being treated differently as regards the exemption laid down by that directive. In that context, the Court sets out the conditions which the competent authorities of a Member State may take into consideration in order to determine whether the services provided by hospitals governed by private law are supplied under ‘social conditions comparable with those applicable to bodies governed by public law’, within the meaning of the VAT Directive, which include conditions intended to reduce the cost of medical care and to make that care more accessible to individuals, as well as hospital performance indicators.

Findings of the Court

One of the two cumulative conditions required by the VAT Directive in order for hospital services offered by a body other than a body governed by public law to be exempt from VAT relates to the status of the establishment supplying those services and requires the operator to be a hospital, a centre for medical treatment or diagnosis or another duly recognised establishment of a similar nature. In that regard, the Court observes, first of all, that the requirement to be ‘duly recognised’ relates to all the entities referred to in Article 132(1)(b) of the VAT Directive and is not limited to ‘other establishments of a similar nature’. Consequently, a Member State may, in the exercise of its discretion, subject a private hospital to the condition that it be ‘duly recognised’ in order for the provision of medical care by that hospital under social conditions comparable with those applicable to bodies governed by public law to be exempted under the VAT Directive.

Next, the Court examines the factors to be taken into account for the purpose of recognition of establishments that are eligible for the exemption at issue. In the implementation of that exemption, compliance with fiscal neutrality requires that all organisations other than those governed by public law should be placed on an equal footing for the purpose of their recognition for the supply of similar services. The exercise of a discretion with regard to the conclusion of an agreement with a hospital and the absence of any obligation on the part of the public authorities to include in their hospital plan establishments governed by private law that carry on their activities under social conditions comparable with those applicable to bodies governed by public law may, contrary to the principle of fiscal neutrality, result in similar private hospitals being treated differently as regards the exemption.

Lastly, concerning the other condition required by the VAT Directive for the exemption of hospital services offered by a body other than a body governed by public law, which relates to the services supplied and requires that they be undertaken under ‘social conditions comparable with those applicable to bodies governed by public law’, the Court states that, in order to determine whether the services of a private hospital are supplied under those conditions, it is necessary to take into consideration, first, the regulatory conditions applicable to the services supplied by hospitals governed by public law with the aim of reducing medical costs and making high-quality care more accessible to individuals and, secondly, the costs of services supplied by the private hospital that remain payable by patients. ( 3 ) The private hospital’s performance in terms of staff, premises and equipment and the cost-efficiency of its management may also be taken into consideration, in so far as hospitals governed by public law are subject to comparable management indicators and such indicators contribute to achieving the objective of reducing medical costs and making high-quality care more accessible to individuals.

( 1 ) Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax (OJ 2006 L 347, p. 1) (‘the VAT Directive’).

( 2 ) Article 132(1)(b) of that directive provides that Member States are to exempt 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.

( 3 ) The Court states, in that regard, that it may be relevant to assess whether fixed-rate daily fees are calculated in a comparable way in a private hospital and in a hospital governed by public law and that it will be for the referring court to examine whether the services supplied by private hospitals are covered by the social security scheme or under contracts concluded with the national public authorities, so that the costs borne by patients are comparable to those borne by patients of public establishments.