The taxpayer provides tenants, who are aged 60 and over, accommodation comprising an equipped kitchen, a living room, a bedroom and a bathroom. The other services provided to the tenants, which are also accessible to the public, are separately chargeable. The tenants receive no financial assistance and the taxpayer seeks to make a profit on all of its supplies. The other services available are a bar/restaurant, a hair and beauty salon, a physiotherapy room, ergotherapeutic activities (i.e. exercise and physical activities), a laundry, a pharmacy and a doctor’s surgery. Following the construction of an annex, the taxpayer reclaimed all the input VAT incurred on construction costs on the basis that its supplies were taxable. The tax authorities refused the claim on the basis that the taxpayer’s supplies were, in its analysis, exempt under Article 13A(1)(g) of the Sixth Directive (now Article 132(1)(g) of the VAT Directive).
The CJEU considered there were two issues:
Recognition as other charitable organisations - The Court noted that the taxpayer is not a body governed by public law. Therefore its supplies will only be exempt if it is an ‘other organisation recognised as charitable by the Member State concerned’. This, the Court concluded, was for the referring court to determine by considering factors such as the:
- existence of specific provisions (national or regional, legislative or administrative, or tax or social security provisions);
- public interest nature of the activities of the taxable person concerned;
- fact that other taxable persons carrying on the same activities already enjoy similar recognition; and
- fact that the costs of the supplies in question may be largely met by health insurance schemes or other social security bodies
In the current case, the Court also noted that account may also be taken of the fact that in the taxpayer’s region, serviced residences are, with old people’s homes and day care centres, the subject of a single piece of legislation, designed to provide a framework for the various institutionalised forms of support and care for elderly persons.
The Court noted that the serviced residences apply prices set under the supervision of the Minister for Economic Affairs. The taxpayer does though operate with a view to profit. However, the Court was of the view that the term ‘organisation’ is very broad and the lack of public financial support does not in itself exclude the taxpayer from being treated as an organisation recognised as charitable by the Member State concerned.
Closely linked to welfare and social security work - The Court noted established case law on Article 13A(1)(g), which has established that the exemption does not apply to every activity performed in the public interest and such favourable treatment is intended to reduce the cost of those services and to make them more accessible. Turning to the optional services, the Court was of the view that catering services, services for the cleaning of the private dwellings at least once per week and services of attending to residents’ personal laundry, provided that they correspond to services offered by old people’s homes, are essential to the exempt supply of the serviced residence and therefore also exempt.
However, as regards the other optional supplies, such as hairdressing and beauty services, the Court observed it is not apparent that the national legislation requires that serviced residences offer those services, nor does it appear to require that old people’s homes do so. Whilst leaving the issue for the referring court to verify, the Court concluded that such services are not essential to the core supply and therefore not exempt. To access the
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