© 2025 by Michael Firth KC, Gray's Inn Tax Chambers
Contact: michael.firth@taxbar.com
H12. Welfare exemptions
EU law exemptions
"(1) Member States shall exempt the following transactions:
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(g) the supply of services and of goods closely linked to welfare and social security work, including those supplied by old people's homes, by bodies governed by public law or by other bodies recognised by the Member State concerned as being devoted to social wellbeing;
(h) the supply of services and of goods closely linked to the protection of children and young persons by bodies governed by public law or by other organisations recognised by the Member State concerned as being devoted to social wellbeing;" (Article 132(1))
Purpose of exemption
- Treat public interest activities in social sector more favourably to reduce cost
"[29] With regard to the objective of the exemption provided for in Article 132(1)(g) of the VAT Directive, it is intended, by treating certain supplies of public-interest services in the social sector more favourably for purposes of VAT, to reduce the cost of those services and thus to make them more accessible to the individuals who may benefit from them (see, to that effect, judgment of 21 January 2016, Les Jardins de Jouvence, C‑335/14, EU:C:2016:36, paragraph 41)." (Finanzamt D C-657/19)
Place where supplier established
- Irrelevant where supplier established
"[51] An interpretation of Article 132(1)(g) of the VAT Directive restricting the scope of the exemption that it sets out to solely supplies of services actually carried out in the Member State where the supplier is established would be contrary to the objective set out in the preceding paragraph provided that the supply of services satisfies the two conditions referred to in that provision, provided in a Member State other than that where the supplier is established to people in need of assistance or care, are subject to VAT, which would necessarily have the effect of increasing the cost of the services concerned, accordingly making it more difficult for those people to have access to those services." (Momtrade Ruse C-620/21)
Identity of supplier
- Query whether natural persons can rely on exemption
"[20] Certain of the exemptions mentioned in Article 13A(1) of the Sixth Directive, including the one provided for in paragraph (g) of that provision, expressly refer to the concept of 'body' or 'organization', whereas others do not. The position is, therefore, that in the former case the exemption may be claimed only by legal persons whereas in the latter case it may also be claimed by natural persons including traders." (Bulthuis-Griffioen C-453/93)
But note the position in relation to the medical exemption referring to establishment - see H7. Medical exemptions.
- Charity must be acting in accordance with its objects
"I do not accept this submission. In my judgment it is implicit in Item 9(a) that the exemption applies to charities whose supplies of welfare services are made in accordance with their objects, that is to say, the specific charitable purposes specified in their constitutions. I accept that it is theoretically possible, if highly improbable, that a charity might supply welfare services otherwise than in accordance with its objects; but such supplies would not be covered by the exemption. This is not a case of differentiating between lawful and unlawful supplies as such, but of construing the scope of the exemption." (LIFE v. HMRC [2020] EWCA Civ 452, Arnold, Floyd, Newey LJJ)
Identity of recipient of supply
- Supplies closely related to welfare need not be provided directly to person requiring welfare support
"[35] First, in the light of the wording of Article 132(1)(g) of the VAT Directive, that provision does not lay down any requirement relating to the recipient of exempted transactions but attaches, by contrast, importance to the intrinsic nature of those transactions and to the status of the operator providing the services or supplying the goods concerned (see, to that effect, judgment of 21 January 2016, Les Jardins de Jouvence, C‑335/14, EU:C:2016:36, paragraph 46).
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[37] Therefore, in order for the supply of services relating to the preparation of expert reports on care and support needs to be regarded as being closely related to welfare and social security work, it is not necessary for those services to be supplied directly to persons reliant on care (see, by analogy, judgment of 14 June 2007, Horizon College, C‑434/05, EU:C:2007:343, paragraphs 31 and 32)." (Finanzamt D C-657/19)
Chain of supply
- Irrelevant that supply is by subcontractor
"[38] Second, in that context, it is irrelevant that the supplies of services in question are provided by the defendant in the main proceedings, in her capacity as a subcontractor, to another taxable person, in the present case the MDK, for which they are essential in order to enable it to provide its own exempt supplies, which it carries out for the care and support insurance fund concerned." (Finanzamt D C-657/19)
Scope of welfare services
Physical, mental or economic dependence
"[60] Furthermore, the Court has held that the provision of care and home help by an out-patient care service to persons in a state of physical or economic dependence is in principle closely linked to welfare and social security work within the meaning of Article 132(1)(g) of the VAT Directive. Similarly, the supply of services provided to persons in a state of mental dependence and intended to protect them in civil matters must also be regarded as such where those persons are not in a position to do so themselves without running the risk of damaging their own financial or other interests, that risk precisely justifying the finding that they lack legal capacity (judgment of 15 April 2021, Administration de l’Enregistrement, des Domaines et de la TVA, C‑846/19, EU:C:2021:277, paragraphs 62 and 63 and the case-law cited).
[61] Therefore, where a body governed by public law or a private entity recognised as a body devoted to social wellbeing for the purposes of Article 132(1)(g) of the VAT Directive supplies services such as those referred to in the preceding paragraph for persons in a state of physical, economic or mental dependence, the Member State where the VAT is due, in accordance with that provision, is required to exempt those supplies from VAT." (Momtrade Ruse C-620/21)
- Allowing the specific activities of such persons' everyday life to be managed
"[64] As the Advocate General has, in essence, also observed in points 63 and 64 of his Opinion, in so far as such services serve to alleviate such a risk by allowing the specific activities of those persons’ everyday life, including those of a financial nature, to be managed with the necessary prudence, they are essential to protect them from acts which may be prejudicial to them or even jeopardise their being able to live with dignity." (EQ C-846/19)
- Domestic help and general care to person in state of physical/economic dependence is supply closely linked to welfare
"[23] The Court has already accepted, in a case relating to an earlier version of Paragraph 4(16) of the UStG, that the provision of general care and domestic help by an out-patient care service to persons in a state of physical or economic dependence amounts to the supply of services closely linked to welfare and social security work for the purposes of Article 13(A)(1)(g) of the Sixth Directive (see Case C‑141/00 Kügler [2002] ECR I‑6833, paragraphs 8, 17, 44 and 61)." (Zimmerman C-174/11)
- Legal related services can sometimes be welfare
"[65] Consequently, the supply of services for the benefit of adults lacking legal capacity and intended to protect them in civil matters falls within the concept of ‘the supply of services closely linked to welfare and social security work’ within the meaning of Article 132(1)(g) of the VAT Directive.
[66] By contrast, where such services are provided by a service provider who also engages, in the context of the powers referred to in paragraph 60 above, in more general activities providing assistance or legal, financial or other advice, such as those which may be linked to the specific skills of a lawyer, a financial adviser or an estate agent, it should be noted that the services provided in the context of those latter activities do not, as a rule, fall within the scope of the exemption provided for in Article 132(1)(g) of the VAT Directive, even if they are performed in the context of assistance to a person lacking legal capacity. Given the strict interpretation to which that exemption must be subject, such transactions cannot be regarded as essential and closely linked to welfare." (EQ C-846/19)
- Supported living for over 60s is welfare
"[44] Consequently, among the services provided by a serviced residence, such as that at issue in the main proceedings, those consisting of the provision of dwellings adapted for elderly persons may benefit from the exemption provided for by Article 13A(1)(g) of the Sixth Directive. In principle, the other services also benefit from the exemption provided for by that provision, on condition in particular that those services, which that serviced residence is obliged to offer pursuant to national legislation, are intended for the support and care of elderly persons and correspond to the services which old people’s homes are obliged to offer also in accordance with national legislation." (Les Jardins de Jouvence C-335/14)
- Hairdressing and beauty services provided in supported living not closely related
"[54] In that context, it should be noted that it is apparent from the observations submitted by LJJ and by Axa that the Order of 3 December 1998 lists, as the optional services required, catering services, services for the cleaning of the private dwellings at least once per week and services of attending to residents’ personal laundry. It appears, therefore, that those optional services, provided that they correspond to services offered by old people’s homes, are essential to the carrying out by a serviced residence of the transactions exempted. However, as regards the provision of other optional services in the circumstances at issue in the main proceedings, such as hairdressing and beauty services, 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, and thus such optional services cannot be regarded as essential to the carrying out by a serviced residence of the transactions exempted. It is however for the national court to verify that point." (Les Jardins de Jouvence C-335/14)
- Tuition in sporting activities is not welfare
"[38] In the present case, surfing and sailing instruction services, such as those at issue in the main proceedings, cannot, because this instruction is provided in particular to school groups, be considered as being "closely linked to the protection of children and young people", within the meaning of Article 132(1)(h) of Directive 2006/112, since these services consist rather of the transmission of a series of practical and theoretical skills intended for the exercise of a sporting activity." (HA C-47/19)
- Supply of workers not welfare
"[39] In that regard, while the Court, in paragraph 28 of the judgment of 12 March 2015, ‘go fair’ Zeitarbeit (C‑594/13, EU:C:2015:164), took the view, in respect of the exemption provided for in Article 132(1)(g) of the VAT Directive, that supplies of services relating to the provision of workers to another taxable person are not, in themselves, supplies of services of general interest carried out in the social sector,..." (Finanzamt D C-657/19)
- Expert report on care and support needs is welfare
"[41] However, as the European Commission has noted, it does not follow that the preparation of expert reports on the level of a person’s care and support needs, such as those in question in the main proceedings, is not essential and closely linked to the performance, by the fund concerned, of the welfare and social security transactions for which it is responsible." (Finanzamt D C-657/19)
- Welfare does not depend on public funding as that would depend on specific features of member state legislation
"[47] Furthermore, it should be observed that the exemptions provided for in Article 13A(1) of the Sixth Directive are autonomous concepts of EU law and that they must therefore be given an EU definition (judgment in Kingscrest Associates and Montecello, C‑498/03, EU:C:2005:322, paragraph 22). However, to define the services referred to in Article 13A(1)(g) of the Sixth Directive by reference to the existence of public financial support in favour of the operator or the taking responsibility for the costs of the services by social security bodies would make that concept dependent on the specific features of the relevant legislation of the Member States, which could compromise the autonomous interpretation that must be given to that concept and could create discrepancies in its application within the European Union." (Les Jardins de Jouvence C-335/14)
Closely linked
- Must be essential to the 'transactions exempted'
"[31] As regards, in the first place, the condition that the supplies of services must be closely linked to welfare and social security work, that condition must be read in the light of Article 134(a) of the VAT Directive, which requires, in any event, that the supply of goods or services concerned be essential to the transactions exempted within the scope of welfare and social security work (see, to that effect, judgment of 9 February 2006, Stichting Kinderopvang Enschede, C‑415/04, EU:C:2006:95, paragraphs 24 and 25)." (Finanzamt D C-657/19 - query how this works given that there is no primary exempt transaction)