Advocate General

In I GmbH (C-228/20), the taxpayer was a German-based private limited liability company which managed and operated hospitals providing neurological medical care. The private hospital company considered its medical services to be exempt but the German tax authorities determined that a significant portion of the private hospital company’s transactions were not exempt on the basis that the company was not considered a specific kind of approved hospital under German law. However, the private hospital company argued that its transactions were exempt under article 132(1)(b) of the VAT directive because it carried out medical services comparable with those of public hospitals. Article 132(1)(b) of the PVD exempts from VAT "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."

The Advocate General noted that there were three requirements of article 132(1)(b): (i) hospital or medical care activity; (ii) carried out by a “duly recognised establishment,"; and (iii) provided under social conditions comparable with those applicable to bodies governed by public law.

The first and second requirements were clearly satisfied. In relation to the third requirement, the Advocate General interpreted “social conditions” to mean the obligations imposed by law on public hospitals with regard to the treatment of their patients but not obligations imposed on public bodies with regard to management of personnel, premises, equipment or cost-effectiveness. The former type of obligations may vary from member state to member state and could concern for example, charges for particular services or a requirement to keep emergency departments open at weekends.

The Advocate General concluded that the PVD precluded the relevant German legislation which required that private hospitals must be of an approved type in order to benefit from the VAT exemption since the relevant requirements for approval were not ‘social conditions’ within the meaning of article 132(1)(b)).

DLA Piper comment:

The Advocate-General conclusion is encouraging for private healthcare. If the Advocate-Generals conclusion is followed, the VAT exemption may be more likely to apply for private healthcare. It would then be irrelevant whether you are a recognized hospital as a private hospital for applying the healthcare VAT exemption.