B Law & Tax
22 May 2023

Tax advisor: VAT exemption applies to services provided by non-resident companies

The referring court holds that, according to Article 132(1)(g) of the VAT Directive, in order to achieve the stated objective, it is irrelevant whether the suppliers and beneficiaries of services that may be exempted from VAT are resident or established in a single Member State or in two Member States. The exemption under this provision applies to any service that meets the cumulative requirements, i.e. that is directly related to social assistance and social security, and that is supplied by a public law entity or other body recognized as social by the Member State, regardless of whether the supply is carried out in the Member State where the supplier of the service is established or in another Member State. The fact that a supplier of services to natural persons resident in a Member State other than that of the supplier uses an intermediary established in that other Member State to contact its customers is not relevant in determining whether the services may be exempt under Article 132(1)(g) of the VAT Directive.

The European Commission has pointed out that services directly related to social assistance and social security provided by the supplier to natural persons, on the one hand, and services provided by the intermediary used by the supplier, on the other hand, are distinct and independent transactions that must be assessed separately and subject to different taxation. Therefore, Article 132(1)(g) of the VAT Directive must be interpreted as meaning that social services supplied in favor of natural persons resident in a Member State other than that of the supplier may be exempt under this provision, and it is not relevant that the supplier has had recourse to an entity established in that other Member State to contact its customers.

Finally, it is necessary to interpret this provision in such a way that the fact that a company providing social services is registered with a public body of the Member State where the tax applies, in accordance with the regulations of that Member State, will be sufficient to consider that company as falling within the concept of “body recognized by the Member State concerned as having a social character”, as set out in the aforementioned provision, only if such registration is subject to a prior verification by the competent national authorities to determine the social character of such company in relation to the aforementioned provision.

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