VAT treatment of the concession of non-health services under the operating contract of a hospital
Judgment of the Spanish Supreme Court dated on 1st July 2017, in response to an appeal in cassation.
The topic has its origin in a contract of public works concession for the construction and operation of the Hospital of Majadahonda.
The Company Hospital of Majadahonda, SA, charged at the Madrid Health Service to the general VAT rate of 16% (existing at that date), over the total amount of the consideration agreed upon by providing residential and complementary non-health services assumed within the framework of the contract of concession of public works.
Subsequently, The Company filed an application for rectification of the VAT returns with return of VAT unduly paid, for the periods from July 2008 to December 2009, under the understanding that it was appropriate to apply the VAT reduced rate (7%), in accordance with the criterion sustained by the Spanish General Tax Directorate in the binding tax ruling V2289/08, which was formulated by the concessionaire of another hospital in the community of Madrid within the framework of a similar concession contract.
Also on the basis of the agreed price included VAT, the Company requested that the amount unduly paid was refunded to It not the public entity that had paid the VAT quotas.
The Spanish Tax Authorities, dismissed the request submitted by the concessionaire to consider that the VAT rate for the services rendered should be the general VAT rate.
The Company, once concluded the administrative requests without obtaining an estimation of its claims, it claimed before the Spanish National Court, which dismissed the same understanding that the subject of the contract is unique, not being at all relevant and essential accommodation of patients, also taking into account that the concessionaire provides services to public administration, which is in turn provides health care to patients.
The Spanish National Court understands that what it is essential is the management of the hospital and not so much attention to each patient, as this part already is included into the health care provided by the health service of the autonomous region.
While the Company against this decision, submitted an appeal before the Spanish Supreme Court who was admitted to process, only with respect to the reason for the applicable VAT rate.
According to criteria of the Company, The Spanish General Tax Directorate, through its binding tax rulings V2289-08, 1 December 2008 and V2159-09 of September 28, 2009, recognized the existence of a unique service consisting in the accommodation of patients and their support as main issue, whereas the remaining issues as accessory of the first, with application to all them of the reduce VAT rate of 7% (then current).
At this point, the Tribunal understands, that contract concluded for the construction of the Hospital of Majadahonda, maintenance and operation of infrastructure only purpose was the provision of a set of services that respond to a common purpose, hospital management, with the aim of attending not only the accommodation and maintenance of the patients, but all the needs of the hospital , provision of complex nature to allow, at the same time, the public entity awarding the provision of health services within their competence.
Although two kind of services are provided, i) no health residential and complementary services, and ii) exploitation of the complementary areas and commercial spaces; the disagreement focuses on non-health residential and complementary services, which includes the following services:
– Cleaning service
– Comprehensive security service
– Restaurant management service
– Urban waste and sanitary service
– Maintenance management service
– Conservation of roads and gardens
– Laundry service
– The clinical and administrative documentation file management service
– Service comprehensive of sterilization
– Disinfestation and rodent control service
– Inner transport and auxiliary management service
– Management of warehouses and distribution service
– Staff of switchboard and reception/information management service.
Understanding the Chamber of the Spanish Supreme Court, respect of the non-health residential and complementary services, the general VAT rate is applicable due to the fact that the reduced VAT rate only would fit into the service of restaurant management. Also mentioning that, in this type of concessions the recipient of the services provided by the concessionaire is the awarding administration itself, and not the public in general, which explains that in the terms and conditions approved in this case is not even mentioned accommodation to refer only to the maintenance of infrastructure and equipment, available to the awarding administration along with other complementary services.
Therefore, a hospital building ceded to the Administration cannot be deemed as a provision of accommodation services, because it would require that the recipient of the services were private individuals, which is not the case.
All of the above, the Spanish Supreme Court dismissed the appeal brought by the Company.