The exemption from VAT by independent groups of persons

Article 132 (1) (f) of Council Directive 2006/112/EC (VAT Directive) provides for an exemption from VAT on:

“the supply of services by independent groups of persons, who are carrying on an activity which is exempt from VAT or in relation to which they are not taxable persons, for the purpose of rendering their members the services directly necessary for the exercise of that activity, where those groups merely claim from their members exact reimbursement of their share of the joint expenses, provided that such exemption is not likely to cause distortion of competition”.

The article provides for an exemption (without credit) when an entity provides services exclusively to its members and that entity recharges its costs to its members at no mark up. This exemption was the subject of two CJEU cases (decided together) with respect to the interpretation afforded by Spain to the exemption.

Cases C-379/24 Agrupació de Neteja Sanitària involved an Economic Interest Group (EIG) set up by healthcare providers in Spain to obtain cleaning services in the healthcare institutions. The EIG contracted external parties to provide such cleaning services and sought from each of its members (the hospitals) their proportional share of the costs.

Case C-380/24 Educat Serveis Auxiliars SCCL related to a cooperative set up by a number of educational establishments, also to share cleaning expenses. Educat again engaged third party providers to provide such cleaning services and recharged the share of costs amongst the educational institutions.

In both cases, the Spanish tax authorities denied the application of the exemption on the basis that the services were not directly provided by the group but procured externally and there was not an exclusive link to the exempt healthcare and educational services.

In the joint judgement, the CJEU rejected the Spanish tax authorities’ arguments and accepted that the condition of directly necessary can also be satisfied when the services are procured externally, as long as the services are necessary for the exempt activity.

Get in Touch:

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Josef Mercieca

jmercieca@quazar.mt / +356 2388 4600