© 2025 by Michael Firth KC, Gray's Inn Tax Chambers
Contact: michael.firth@taxbar.com
H2a. Medical: duly recognised and comparable social conditions
Three requirements for non-public body
"[37] In accordance with the wording of that provision, two cumulative conditions must be satisfied for hospital and medical care and closely related activities offered by an entity other than a body governed by public law to be eligible for exemption from VAT. The first condition relates to the services supplied and requires that they be undertaken under social conditions comparable with those applicable to bodies governed by public law (see, to that effect, judgment of 5 March 2020, Idealmed III, C‑211/18, EU:C:2020:168, paragraphs 20 and 21).
[38] The second condition 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." (I GmbH C-228/20)
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"[41] More specifically, regarding the exemption that Article 132(1)(b) of the VAT Directive sets out, there are three requirements, (22) which respectively relate to:
– the nature of the service provided,
– the form of the establishment providing the service, and
– the manner in which the service is provided" (I GmbH C-228/20, AG Hogan)
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- Interaction of the 'duly recognised' and 'comparable social conditions' elements
"[58] As regards Article 13A(1)(b) of the Sixth Directive, it is clear from the Court’s settled case-law that that provision covers duly recognised establishments pursuing social purposes, such as the protection of human health (see, to that effect, Dornier, paragraph 47)." (Copygene C-262/08)
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AG attempted to separate them out
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​"[77] Inasmuch, therefore, as the Court appears to have suggested in paragraph 54 of L.u.p. that the discretion conferred by Article 132(1)(b) of the VAT Directive on the Member States would enable them to impose a requirement that the medical centre in question treat a specified percentage of patients covered by health insurance schemes as a condition of recognition, that suggestion is, with respect, incorrect and is unsupported by both the actual legislative text and, for that matter, the earlier case-law. The due recognition requirement of Article 132(1)(b) of the VAT Directive simply enables Member States to ensure that the medical establishments meet appropriate standards of health care delivery: it should not be interpreted as permitting Member States, so to speak, to conscript private health care providers into a public health system by subjecting the former to a disadvantageous treatment for VAT purposes. As I have just indicated, in so far as the Court appears to suggest otherwise in paragraph 54 of L.u.p., I consider – again, with respect – that this was in error and should not now be followed or applied." (I GmbH C-228/20, AG Hogan)
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But that was not accepted
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"[56] It follows that the recognition of an establishment that may be exempted from VAT under Article 132(1)(b) of the VAT Directive allows the Member States, first, to ensure that only establishments which pursue activities in line with the purposes of that provision qualify for such an exemption...
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[58] The public interest objective pursued by that provision supports the interpretation that the discretion enjoyed by the Member States, in accordance with the case-law referred to in paragraph 40 above, relates to all the establishments mentioned in that provision.
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[61] As regards, secondly, the factors to be taken into account for the purpose of recognition of establishments that are eligible for the exemption from VAT, within the meaning of Article 132(1)(b) of the VAT Directive, it is for the national authorities, in accordance with EU law and subject to review by national courts, to take into consideration a number of factors, which include the public interest of the activities of the taxable person in question, the fact that other taxable persons carrying on the same activities already have similar recognition, and the fact that the costs of the services in question may be largely met by health insurance schemes or other social security bodies (judgment of 10 June 2010, CopyGene, C‑262/08, EU:C:2010:328, paragraph 65 and the case-law cited)." (I GmbH C-228/20)
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- Same factors may be relevant to both
"[69] As regards, next, the fact that CopyGene’s activities at issue in the main proceedings receive no support from and are not covered by the public social security scheme, it is clear from the case-law cited in paragraph 65 of the present judgment that the national authorities are entitled to take that factor into consideration in order to determine whether an entity should be recognised for the purposes of Article 13A(1)(b) of the Sixth Directive.
[70] That same fact is also a matter which can be taken into account in the determination, which is not the subject of this request for a preliminary ruling, of whether a taxable person supplies its services ‘under social conditions comparable to those applicable to bodies governed by public law’ within the meaning of that provision."
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Duly recognised ​
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- Requirement for due recognition applies to all non-public bodies
"(b) hospital and medical care and closely related activities undertaken
[i] by bodies governed by public law or,
[ii]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;" (Article 132(1)(b)) (formatting added)
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"[48] In the present case, since, in order to qualify for the exemption, ‘other establishments’ must be ‘of a similar nature’ to ‘hospitals and centres for medical treatment or diagnosis’, the condition for the recognition of an establishment must be understood as applying to all the establishments mentioned in Article 132(1)(b) of the VAT Directive." (I GmbH C-228/20)
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- Provision of services by medical professionals does not prevent refusal of recognition
"[68] As regards, first of all, the fact that CopyGene’s services are supplied, within the framework of contracts concluded with it, by professional medical personnel, that is to say nurses, midwives and bioanalysts, the documents before the Court do not reveal for which activities those personnel are ‘professionally qualified’ under the relevant national legislation, the content of which is also not apparent from those documents. That being so, it should be pointed out that, in any event, the mere fact that they are qualified health professionals does not prevent, as such, the Danish authorities refusing to grant to a taxable person such as CopyGene the recognition which would entitle it to the exemption under Article 13A(1)(b) of the Sixth Directive." (Copygene C-262/08)
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- Source of funding can be taken into account but may be overridden by equal treatment
"[69] As regards, next, the fact that CopyGene’s activities at issue in the main proceedings receive no support from and are not covered by the public social security scheme, it is clear from the case-law cited in paragraph 65 of the present judgment that the national authorities are entitled to take that factor into consideration in order to determine whether an entity should be recognised for the purposes of Article 13A(1)(b) of the Sixth Directive.
[70] That same fact is also a matter which can be taken into account in the determination, which is not the subject of this request for a preliminary ruling, of whether a taxable person supplies its services ‘under social conditions comparable to those applicable to bodies governed by public law’ within the meaning of that provision.
[71] It should, however, be made clear that the considerations set forth in paragraphs 69 and 70 of the present judgment do not mean that the exemption under Article 13A(1)(b) of the Sixth Directive must be systematically excluded when the services supplied are not reimbursed by the social security authorities. It is rather a factor which must be weighed in the balance, and which could be outweighed, for example, by the necessity to ensure equal treatment. Indeed, it is also apparent from the case-law that, if, for example, a taxable person’s situation is comparable to that of other operators providing the same services in comparable situations, the mere fact that the cost of those services is not fully covered by the social security authorities does not justify a difference in the treatment of providers for VAT purposes (see, to that effect, Dornier, paragraph 75)." (Copygene C-262/08)
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- Authorisation relevant but does not automatically lead to recognition
"[74] As regards, finally, the fact that CopyGene has been authorised by the competent health authorities to handle cord stem cells under the national legislation implementing Directive 2004/23, it is true that, to a certain extent, that factor tends to suggest that CopyGene carries on activities dealing with hospital and medical care. Such authorisation can therefore be a factor tending to support the argument that CopyGene is, in any case, ‘duly recognised’ within the meaning of Article 13A(1)(b) of the Sixth Directive.
[75] However, if the national authorities are not to be deprived of the discretion which that provision confers upon them, the mere fact that they have authorised activities such as those at issue in the main proceedings, in accordance with the European Union’s prescribed standards of quality and safety in the sector concerned, cannot lead, by itself and automatically, to recognition from the point of view of Article 13A(1)(b) of the Sixth Directive. As the Danish Government maintains, obtaining such authorisation is a necessary condition to carrying on the activity of a private stem cell bank. However, the granting of such authorisation is not, in itself, synonymous with recognition for the purposes of Article 13A(1)(b) of the Sixth Directive." (Copygene C-262/08)
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- Public interest and treatment of other persons carrying on same activity
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"[54] As to the second condition, it is also apparent from the case-law that, in order to determine whether establishments governed by private law may be recognised for the purpose of the application of the exemption provided for in Article 13A(1)(b) of the Sixth Directive, the national authorities may, in accordance with Community law and subject to review by the national courts, take into consideration, inter alia and in addition to the public interest of the activities of the taxable person in question and the fact that other taxable persons carrying on the same activities already have similar recognition, the fact that the costs incurred for the treatment in question may be largely met by health insurance schemes or other social security bodies (Dornier, paragraphs 72 and 73)." (LUP C-106/05)
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"[72] In paragraphs 57 and 58 of Kügler, cited above, the Court added that, in order to determine which organisations should be recognised as charitable within the meaning of Article 13A(1)(g) of the Sixth Directive, the national authorities should, in accordance with Community law and subject to review by the national courts, take a number of factors into consideration. Those factors include the public interest of the activities of the taxable person in question, the fact that other taxable persons carrying on the same activities already have similar recognition, and the fact that the costs incurred for the treatment in question may be largely met by health insurance schemes or other social security bodies.
[73] As correctly pointed out by the Advocate General in point 55 of her Opinion, those statements appear to apply equally to the interpretation of Article 13A(1)(b) of the Sixth Directive as regards recognition of the establishments referred to in that provision." (Dornier C-45/01)
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Under social conditions comparable ​
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- The exemption for non public bodies only applies to care provided "under social conditions comparable"
"(b) hospital and medical care and closely related activities undertaken
[i] by bodies governed by public law or,
[ii]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;" (Article 132(1)(b)) (formatting added)
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"[37] In accordance with the wording of that provision, two cumulative conditions must be satisfied for hospital and medical care and closely related activities offered by an entity other than a body governed by public law to be eligible for exemption from VAT. The first condition relates to the services supplied and requires that they be undertaken under social conditions comparable with those applicable to bodies governed by public law (see, to that effect, judgment of 5 March 2020, Idealmed III, C‑211/18, EU:C:2020:168, paragraphs 20 and 21).
[38] The second condition 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." (I GmbH C-228/20)
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- The social conditions comparison relates to the services supplied
"[75] As regards, in the first place, the scope of the concept of ‘comparable social conditions’, it should be noted, as the Advocate General observed in point 89 of his Opinion, that it is clear from the very wording of Article 132(1)(b) of the VAT Directive that that condition relates to the services supplied by the establishment concerned." (I GmbH C-228/20)
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- Proportion of the care services provided under comparable social conditions is irrelevant
"[21] Since that requirement relates to the services provided and not to the provider in question, the proportion of the care services provided under comparable social conditions, within the meaning of that provision, in relation to all the activity undertaken by that provider is irrelevant for the application of the exemption laid down in Article 132(1)(b) of that directive." (Idealmed III C-211/18)
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- Body providing services both under comparable social conditions and under different conditions is partially exempt
"[24] Obviously, this also means that an entity other than a body governed by public law, which provides medical services both under social conditions comparable to those applicable to bodies governed by public law within the meaning of Article 132(1)(b) of Directive 2006/112 and under different conditions, becomes a mixed taxable person, that is, one who carries out both taxable and exempt transactions. This involves additional administrative burdens related to the need to properly account for both output and input VAT. (4) However, this is an inevitable consequence of undertaking activities which are exempt from VAT." (Idealmed III C-211/18, AG Szpunar)
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- Article 132 does not define precisely the aspects of the service that must be compared
"[73] In that regard, it should be borne in mind that Article 132(1)(b) of the VAT Directive does not define precisely the aspects of the healthcare services concerned that must be compared in order to assess whether they are provided under comparable social conditions and, consequently, whether that provision is applicable (see, to that effect, judgment of 5 March 2020, Idealmed III, C‑211/18, EU:C:2020:168, paragraph 24)." (I GmbH C-228/20)
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- Covers duly recognised establishments pursuing social purposes
"[47] ... Whilst it is true that the Court in that case found that the exemption of supplies of goods effected in connection with the provision of medical care envisaged in Article 13A(1)(c) could not be justified under letter (b) of the same provision, that interpretation follows inter alia from the fact that the latter provision covers duly recognised establishments pursuing social purposes and provides expressly for exemption of activities which are closely linked to medical care; the same cannot be said of Article 13A(1)(c)." (Dornier C-45/01)
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- Requirement is for similarity (need not be identical)
"[76] It also follows from the wording of that provision that, first, the conditions under which the services are supplied in a hospital must be, not identical, but similar to those under which the services are supplied in an establishment governed by public law and, secondly, those conditions must be of a social nature." (I GmbH C-228/20)
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- Must be a comparison of social conditions
"[76] It also follows from the wording of that provision that, first, the conditions under which the services are supplied in a hospital must be, not identical, but similar to those under which the services are supplied in an establishment governed by public law and, secondly, those conditions must be of a social nature." (I GmbH C-228/20)
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- Social in the same sense as social housing
"[129] As to the first of those issues, we consider that the word ‘social’ in the expression ‘social conditions’ has a meaning akin to its meaning in expressions such as ‘social security’ and ‘social housing’: it has to do with the basis upon which those in need (here, medical need) receive treatment. We therefore regard it as sufficient in order to satisfy the ‘social conditions’ requirement that patients of the Trusts and of third party customers receive the benefit of GSTS’s services on the same terms as they would if the service were still provided in-house within the Trust Hospitals, which are undeniably public bodies." (GSTS Pathology Services LLP v. HMRC [2014] UKFTT 211 (TC), Judge Paines QC)
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- Objective of comparison: fair competition between public and private
"[96] The key objective of Article 132(1)(b) of the VAT Directive in that and other respects is indeed to ensure comparable tax treatment as between public and private medical establishments that, broadly speaking, perform the same functions and which, again broadly speaking, treat their patients in approximately the same fashion. In this regard, however, it is clear that Member States cannot require private hospitals to supply medical services under social conditions that have no equivalent in respect of the legal obligations imposed on public hospitals as a condition of obtaining the VAT exemption in question.
[97] The term ‘comparable’ also implies, in my opinion, a certain degree of generalisation in the comparison. Given, however, that the objective of those conditions is to ensure a broad equality for tax purposes between private and public bodies, I believe that Member States must ensure that private entities substantially comply with all the social conditions imposed on public establishments by national legislation that may have an appreciable effect on the fair competition between public and private establishments. This would include, in particular, all the social conditions which are likely to have a significant impact on the management of public bodies or on the choice of patients to use the services of a private or public body. A Member State may not, however, grant a VAT exemption in respect of services provided by private establishments that have only partially complied with the social conditions applicable to public establishments that are likely to have such an impact on fair competition between the two types of establishments." (I GmbH C-228/20 AG Hogan)
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- Query whether voluntary compliance with similar social conditions would be sufficient
"[81] Moreover, it is sufficient for that purpose that the private hospital or any similar medical establishment voluntarily complies with the legal requirements imposed by a Member State in order to benefit from the exemption laid down in Article 132(1)(b) of the VAT Directive. Any other conclusion would mean that a Member State could entirely exclude private medical establishments from the scope of the exemption laid down in that provision simply by electing not to subject such private bodies to social obligations comparable than those prescribed by law in respect of public bodies.
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[83] In that regard, it should be noted that the VAT Directive does not specify what is meant by the ‘social conditions comparable’ to those applying to public hospitals providing medical care. (57) Just as in the case of the condition of being ‘duly recognised’, this does not mean that this concept must be understood by reference to national law, but rather that, within the scope of the definition of this concept, the Member States enjoy a discretionary power to decide on the social conditions which public bodies supplying medical services must respect. Article 132(1)(b) of the VAT Directive further requires that those conditions will also have to be respected by private bodies for their services to be eligible for exemption." (I GmbH C-228/20 AG Hogan)
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Relevant factors
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- Cost and quality are relevant factors
"[78]In the third place, as pointed out in paragraph 57 above, Article 132(1)(b) of the VAT Directive is intended, inter alia, to reduce the cost of medical care and to make that care more accessible to individuals, which also entails the accessibility of high-quality care.
[79] Therefore, in order to determine whether the services of private hospitals are provided under social conditions comparable with those applicable to bodies governed by public law, it will be for the referring court, first of all, to take into consideration the conditions, laid down by the applicable legislation, to which hospitals governed by public law are subject as regards the services supplied, and which are intended to achieve the objective of reducing the cost of medical care and making high-quality care more accessible to individuals, and which are appropriate and necessary for that purpose.
[80] Next, it follows from the objective of the exemption provided for in Article 132(1)(b) of the VAT Directive, as noted in paragraph 78 above, that the costs of the services supplied by private hospitals which remain payable by patients must be taken into account.
[81] In that regard, as the European Commission states, the question whether fixed-rate daily fees are calculated in a comparable way in a private hospital and in a hospital governed by public law may prove relevant. Similarly, it will be for the referring court to examine whether the services supplied by private hospitals are covered by the social security regime or under contracts concluded with public authorities of a Member State, so that the costs that remain payable by patients are at a level comparable to those borne by patients of public establishments." (I GmbH C-228/20)
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"[30] Accordingly, it must held that the element concerning the fixing of prices of those supplies in an agreement concluded with the public authorities of a Member State is an element that may be taken into account for the purpose of determining whether the care services provided by a private hospital are provided under social conditions comparable to those applicable to bodies governed by public law, within the meaning of Article 132(1)(b) of Directive 2006/112."(Idealmed III C-211/18)
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- May take into account public interest of activities, and funding through social security
"[61] As regards, secondly, the factors to be taken into account for the purpose of recognition of establishments that are eligible for the exemption from VAT, within the meaning of Article 132(1)(b) of the VAT Directive, it is for the national authorities, in accordance with EU law and subject to review by national courts, to take into consideration a number of factors, which include the public interest of the activities of the taxable person in question, the fact that other taxable persons carrying on the same activities already have similar recognition, and the fact that the costs of the services in question may be largely met by health insurance schemes or other social security bodies (judgment of 10 June 2010, CopyGene, C‑262/08, EU:C:2010:328, paragraph 65 and the case-law cited).
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[74] In those circumstances, the Court has found that factors such as whether the services are in the public interest, and the fact that the services are covered by the social security scheme or are supplied under contracts concluded with public authorities of a Member State, at prices fixed by those contracts and whose costs are partially borne by the social security institutions of that Member State, are factors that may be taken into account (see, to that effect, judgments of 10 June 2010, CopyGene, C‑262/08, EU:C:2010:328, paragraphs 69 and 70, and of 5 March 2020, Idealmed III, C‑211/18, EU:C:2020:168, paragraph 32)." (I GmbH C-228/20)
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"[26] The public interest nature of those services is therefore a relevant matter to take into account for the purpose of determining whether the care services provided by a private hospital fall within the exemption laid down in Article 132(1)(b) of that directive.
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[31] In the third place, it is clear from the Court’s case-law that the arrangements for services to be paid for by the social security institutions of a Member State are relevant in the context of examining whether the conditions under which those services are provided are comparable, within the meaning of that provision (see, to that effect, judgment of 10 June 2010, CopyGene, C‑262/08, EU:C:2010:328, paragraphs 69 and 70)." (Idealmed III C-211/18)
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- Performance in terms of staff, premises etc may be relevant to cost and quality
"[82] Lastly, the private hospital’s performance in terms of staff, premises and equipment and the cost-efficiency of its management may 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, which is a matter for the referring court to determine." (I GmbH C-228/20)
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Examples
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- Comparable social conditions aspect allows a laboratory that is of a similar nature to hospital not to be 'duly recognised'
"[35] That line of argument cannot be accepted. As the medical tests, in the light of their therapeutic purpose, come within the concept of ‘medical care’ as referred to in Article 13A(1)(b) of the Sixth Directive, a laboratory such as that at issue in the main proceedings must be regarded as being an establishment ‘of a similar nature’ as the ‘hospitals’ and the ‘centres for medical treatment or diagnosis’ within the meaning of that provision.
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[54] Accordingly, in requiring, for the purpose of recognition as laboratories governed by private law for the application of that exemption, that at least 40% of the medical tests carried out by the laboratories concerned must be intended for persons insured by a social security authority, the Member State in question did not go beyond the limits of the discretion allowed to it by that provision." (LUP C-106/05 - LUP had not established that it met the 40% requirement (§11))
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- Permissible to distinguish based on how costs of supplies are funded that applies to all candidates for recognition
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​[53] As to the second condition, it is also apparent from the case-law that, in order to determine whether establishments governed by private law may be recognised for the purpose of the application of the exemption provided for in Article 13A(1)(b) of the Sixth Directive, the national authorities may, in accordance with Community law and subject to review by the national courts, take into consideration, inter alia and in addition to the public interest of the activities of the taxable person in question and the fact that other taxable persons carrying on the same activities already have similar recognition, the fact that the costs incurred for the treatment in question may be largely met by health insurance schemes or other social security bodies (Dornier, paragraphs 72 and 73).
[54] Accordingly, in requiring, for the purpose of recognition as laboratories governed by private law for the application of that exemption, that at least 40% of the medical tests carried out by the laboratories concerned must be intended for persons insured by a social security authority, the Member State in question did not go beyond the limits of the discretion allowed to it by that provision." (LUP C-106/05)
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- But contrary to equal treatment to distinguish based on whether social funding covers all or only part of cost
"[75] It is in this light that it is appropriate to take account of the fact that the social security authorities do not reimburse, or only partially reimburse, patients for the costs of psychotherapeutic treatment. If Dornier's situation is comparable in this respect to that of other operators providing the same treatment, the mere fact that the cost of that treatment is not fully covered by the social security authorities does not justify a difference in the treatment of providers for VAT purposes." (Dornier C-45/01)
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- Not permissible to refuse to recognise on the basis that there is already sufficient supply capacity
[67] The referring court states, in that regard, as mentioned in paragraph 21 above, that the consequence of applying the national legislation at issue is that the exemption provided for in Article 132(1)(b) of the VAT Directive applies only if the services supplied by the private hospital in question meet specified needs under social security law. Thus, in practice, a private hospital would have no prospect of being included in the hospital plan for the Land in which it is located or of concluding care supply contracts with the statutory health insurance funds if enough hospital beds for a particular speciality are already available within the Land in question.
[68] As the Advocate General observed in points 111 and 112 of his Opinion, it follows from the information provided by the referring court that the providers of statutory accident insurance, the Land-level health insurance fund associations and substitute fund associations all enjoy a discretion as to whether to conclude an agreement with a hospital and that the Länder are not obliged to include in their hospital plan private non-university hospitals that carry on their activities under social conditions comparable with those applicable to bodies governed by public law.
[69] The exercise of such discretion depending on needs defined under social security law may, contrary to the principle of fiscal neutrality, result in similar private hospitals being treated differently as regards the exemption laid down in Article 132(1)(b) of the VAT Directive in respect of similar services supplied under social conditions comparable with those applicable to bodies governed by public law." (I GmbH C-228/20)
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