Opinion of Advocate General Kokott delivered on 1 December 2022.

• Jurisdiction: European Union
• ECLI: ECLI:EU:C:2022:952
• Date: 01 December 2022
• Celex Number: 62021CC0620
• Court: Court of Justice (European Union)

Provisional text

OPINION OF ADVOCATE GENERAL

KOKOTT

delivered on 1 December 2022 (1)

Case C‑620/21

MOMTRADE RUSE OOD

v

Direktor na Direktsia ‘Obzhalvane i danachno-osiguritelna praktika’ Varna pri Tsentralno upravlenie na Natsionalnata agentsia za prihodite

(Request for a preliminary ruling from the Varhoven administrativen sad (Supreme Administrative Court, Bulgaria))

(Reference for a preliminary ruling – VAT Directive – Article 132(1)(g) – Exemption for the supply of services closely linked to welfare and social security work – Body recognised as being devoted to social wellbeing – Member State concerned which recognises the body as being devoted to social wellbeing)

I. Introduction

1. Demographic change and globalisation do not stop even for EU VAT law. This can be seen from the present case. An undertaking established in Bulgaria posts its employees throughout the European Union, including to private individuals established in Germany and Austria who, for reasons of age or health, need home help as well as care. In principle, the place of supply of these services to private individuals is the place where the supplier is established, in this case Bulgaria. Accordingly, Bulgarian law is applicable in respect of the correct levying of VAT and thus also the exemption for those services which are carried out in Germany or Austria.

2. The exemption at issue covers services closely linked to welfare and social security work supplied by a body ‘recognised by the Member State concerned as being devoted to social wellbeing’. The crucial question is which State is the ‘Member State concerned’. Is it the State in whose territory the services subject to relief are supplied (country of destination) because its social welfare systems generally pay for the supply? Or is it the State which would actually be entitled to the tax revenue if the supply were not exempt? In the case of supplies to non-taxable persons like those at issue, this would be the country of origin, while in the case of supplies to taxable persons (such as a hospital in another country), this would be the country of destination.

3. Both solutions create practical problems. If the Member State which is the country of destination takes the decision on recognition, it may be difficult for the Member State which is the country of origin to review that decision, even though its tax revenue could be indirectly affected. If the Member State which is the country of origin is competent for such recognition, that Member State could establish an ideal location for cross-border welfare services by adopting a very liberal recognition practice. This could lead to distortions of competition with undertakings established in the country of destination, which a harmonised system of VAT is in fact intended to prevent.

4. Because there can be only one solution, however, the Court must decide in this case whether the exemption of transactions of certain bodies to be recognised by the ‘Member State concerned’ always applies to the State which is the place of supply for VAT purposes (in this case Bulgaria) or to the country of destination (in this case Germany or Austria).

II. Legal framework

A. European Union law

5. The legal framework is formed by Directive 2006/112/EC of 28 November 2006 on the common system of value added tax (‘the VAT Directive’). (2)

6. Article 45 of the VAT Directive concerns the place of supply of services to a non-taxable person and states:

‘The place of supply of services to a non-taxable person shall be the place where the supplier has established his business. However, if those services are provided from a fixed establishment of the supplier located in a place other than the place where he has established his business, the place of supply of those services shall be the place where that fixed establishment is located. In the absence of such place of establishment or fixed establishment, the place of supply of services shall be the place where the supplier has his permanent address or usually resides.’

7. Article 132(1)(g) of the VAT Directive governs exemption:

‘1. Member States shall exempt the following transactions:

(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;’

8. Point (c) of the first paragraph of Article 133 of the VAT Directive permits Member States to make the granting of the abovementioned exemption subject to a condition:

‘Member States may make the granting to bodies other than those governed by public law of each exemption provided for in points (b), (g), (h), (i), (l), (m) and (n) of Article 132(1) subject in each individual case to one or more of the following conditions:

(c) those bodies must charge prices which are approved by the public authorities or which do not exceed such approved prices or, in respect of those services not subject to approval, prices lower than those charged for similar services by commercial enterprises subject to VAT.’

9. Article 134(a) of the VAT Directive provides:

‘The supply of goods or services shall not be granted exemption, as provided for in points (b), (g), (h), (i), (l), (m) and (n) of Article 132(1), in the following cases:

(a) where the supply is not essential to the transactions exempted’.

B. Bulgarian law

10. The VAT Directive was transposed by the Zakon za danaka varhu dobavenata stoynost (Law on value added tax; ‘the ZDDS’).

11. Under Article 21 of the ZDDS, the place of supply of services provided to a non-taxable person is deemed to be the place where the supplier has established his independent business.

12. Article 40 of the ZDDS provides that the supply of social services in accordance with the Zakon za sotsialnoto podpomagane (Law on social assistance; ‘the ZSP’) is exempt.

13. Article 16 of the ZSP stipulates that social services are based on targeted social work to help people with their day-to-day activities or social integration and are provided at the person’s choice and request based on a personal needs assessment.

14. Under Article 18 of the ZSP, social services, including those supplied by Bulgarian legal entities, may be provided only following registration with the Agentsia za sozialno podpomagane (Social Assistance Agency, Bulgaria).

15. According to the legal definition in Article 1, point 6, of the Supplementary provisions of the ZSP, ‘social services’ means activities to support people and increase their opportunities to lead an independent life; point 7 states that ‘social services in the community’ are provided within a family or family related environment.

16. Article 40 of the Pravilnik za prilagane na ZSP (ZSP Implementing Regulations; ‘the PPZSP’) states that persons wishing to avail themselves of social services must submit a written request to the managing body in the place where they are currently residing if the provider of the social services is a legal entity. As references, they must enclose a copy of an identity document, a copy of their personal medical file, if available, and a medical report, if available. The managing body conducts an assessment of the person’s need for social services and records the results in a standard-format report.

17. According to Article 40d of the PPZSP, the social services provider must prepare a personal plan based on the needs assessment in which it formulates objectives and sets out the activities required to meet those needs, including day-to-day needs and healthcare, education, rehabilitation and other needs.

18. Article 40e of the PPZSP requires social services providers to keep a client register containing data on the recipient and the service provided.

III. Facts and reference for a preliminary ruling

19. Momtrade Ruse OOD (‘Momtrade’) is a limited liability company which mainly provides outpatient social services. Since 24 June 2014, it has been registered voluntarily as a taxable person under the ZDDS. In addition, it is registered with the Social Assistance Agency of the Bulgarian Ministry of Labour and Social Policy (3) as a provider of social services in the form of personal carers, social assistants and home help for elderly people.

20. A tax audit was conducted for Momtrade for the period from 24 June 2014 to 31 December 2015. The audit covered the provision of services to various private individuals of German and/or Austrian nationality who were probably resident in Germany or Austria.

21. Based on contracts concluded with those private individuals, Momtrade posted care and home help workers to the clients’ homes. The various duties are detailed in a questionnaire attached to the contract. These questionnaires were prepared by a placement agency registered in Germany or Austria, which referred clients to Momtrade under a placement agreement.

22. Aside from home help, the listed duties include caring for elderly people with health problems who are unable to take care of themselves. Each contract states both the client’s name and the name of the placement agency. The payments made to Momtrade by the private individuals are not disputed.

23. The German tax authorities initiated an exchange of information. It was established further to that exchange that the place of supply of those services was in Bulgaria. Consequently, these transactions were not taxable in Germany, but were subject to tax in Bulgaria under the Bulgarian ZDDS.

24. Based on the documents produced by Momtrade, the revenue authorities in Bulgaria found that there was no agreement on the provision of ‘social services’, as clients’ personal needs were not indicated. They held that German and Austrian law were relevant, in addition to the ZSP, because the service was in fact provided in another Member State, and that, in order for Momtrade to be exempt under Article 40, point 1, of...