Latest European Court of Justice rulings on VAT (Part I)

On 7 April 2022, the European Court of Justice published some long-awaited judgments and Opinions of Advocates General in VAT cases, which we will briefly review in our newsletters.

C-333/20 - Berlin Chemie A. Menarini SRL

In the context of this case, a long-standing and controversial case in the EU has been referred back to the Court of Justice, which raises a question that has a major impact on the VAT treatment of transactions between members of a multinational group: can a subsidiary as an independent entity constitute a fixed establishment of the parent company in another Member State?

The ECJ has held that the relevant provisions of the VAT Directive must be interpreted as meaning that a company established in a Member State cannot be considered as having a sufficient degree of permanence and a suitable structure in terms of human and technical resources to receive services in another Member State by virtue of its subsidiary in this Member State. In the present case, therefore, a company cannot be considered as having a fixed establishment to receive services in another Member State where its subsidiary provides, exclusively to that company, marketing, regulatory, advertising and representation services, even if these services are capable of having a direct influence on the volume of its sales.

C-228/20 - I (Exonération de TVA des prestations hospitalières)

In this German case, the ECJ examined whether the tax exemption granted to public health institutions can be applied to private hospitals which are not public institutions and do not have an agreement with the health insurance funds.

Under the VAT Directive, two cumulative conditions are necessary for the VAT exempt treatment of healthcare services provided by private healthcare institutions:

• the provision of services under social conditions comparable to those of services provided by public institutions, and
• the institutions should be officially authorized as a hospital, medical treatment centre, diagnostic centre or other similar officially accredited institution.

The national authorities have discretionary powers to assess the above conditions, but the VAT Directive precludes national legislation which results in private hospitals providing similar services under similar social conditions being treated differently from public hospitals.

In our next newsletter, we will present the two Advocate General Opinions published in other ECJ cases on 7 April 2022.

14 April, 2022

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This newsletter provides general information and does not constitute tax advice.