ECJ’s Decision of March 12th, 2015. Go Fair. Exemption of VAT for bodies recognised as being devoted to social wellbeing


The Court’s decision concerns to the interpretation of Article 132.1.g) of the VAT Directive as regards the recognition of a body as being devoted to social wellbeing in order to apply the VAT exemption on supplies of services and/or goods that it performs.

The peculiarity of the case is that the company of the sentence is not, a priori, a social entity, but a temporary employment agency whose purpose is the transfer of workers to other companies. In particular, it did transfer nursing assistants to inpatient and outpatient care establishments, who were fully integrated into the organizational structure of the establishments. The company understood that its purpose was of social character, and therefore was applicable the VAT exemption in the transfer of such workers.

The national administration settled the VAT to such services because it understood that the company was not providing a service of social assistance or care of people but cession of temporary workers, so it did not meet the requirements laid down in the national legislation implementing the exemption of VAT. However, the national Court considers that, perhaps the company itself could comply with the provisions set by the European VAT Directive in that sense, as it refers to the execution of activities directly related to welfare and security social, so that the entity could directly invoke the application of the Directive. For this reason the national court asks to the EU Court whether nursing graduates and/or business cession of staff can be considered as bodies which are recognized of social assistance.

The Court begins by recalling that the terms relating to VAT exemptions must be interpreted strictly and must be the national bodies who determine whether organisms that seek to apply the exemption are eligible for it or not.

Notwithstanding this reference, the Court refers to some aspects that should guide to see if an organization is eligible, such as the nature of general interest in the activities of the subject, the fact that other taxable persons carrying on the same activities already enjoy such recognition or that health insurance or other social security agencies take over a large part of the cost of benefits in question.

In any case, there are two reasons why the Court does not consider that the exemption does apply:

  • It has not been recognized as a charitable organization under national law by failing to comply with the requirements established for this purpose by it.
  • The exemption does not apply to employees of a company since VAT does not apply to employees under a labour agreement.

Moreover, regarding the possibility of the company of directly invoking the application of the EU Directive, it is true that the company in question fall within the definition of a “body” in a broad sense, but in any case the Court explained that the temporary work agency is not considered of general interest in the social sector, so does not comply with the regulations of the Directive.

Attached is a copy of the Decision number C-594/13.

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ECJ VAT Social recognised body.htm

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