Course: European Value Added Tax

Week: 5
Name tutor: M.M. Gabriël
Name: Atanas
Surname: Atanasov
UM student number: i6029710
E-mail address: n.atanasov@student.maastrichtuniversity.nl
Participant LL.M Track Indirect Tax: No
University: Maastricht University
Student ID number: i6029710

1
Question 1

The Hospital in Maastricht is a taxable person based on article 9 VD. It is any person, established at any
place. It conducts independently economic activities. Article 10 VD provides for what independent means.
The concept of independence in the VAT Directive excludes persons who are bound to an employer with
an employment contract (see Van der Steen case). In order to establish if someone is acting independently
it is necessary to find out if that person is bearing any economic risks linked to their activity, which the
hospital does. Furthermore, economic activity means any activity of producers, traders or persons
supplying services. Mining and agricultural activities can also be considered as economic activities.
Furthermore, the exploitation of tangible or intangible property with the intention of obtaining income on
a continuous basis is also an economic activity. According to article 9 VAT Directive, an activity is
economic if its goal is to generate income. It is not necessary that the income from the activity actually
turns into profit. The economic activity must be performed on a continuing basis. To sum up, an economic
activity is an activity performed for consideration and on a continuing basis. The purpose of the activity is
irrelevant. The activities of the hospital fall within the scope of economic activities.

The hospital can be said to provide services. On the one hand, it provides treatment to its patients and on
the other hand it provides laundry services. The definition of supply of services is in article 24 VD and
provides that everything that is not a supply of goods shall be services. The supply made by the hospital is
not a supply of goods – article 14 VD, so it should be considered as a service. Furthermore, the supply of
services is a taxable transaction based on article 2 (1) (c) VD.

The supply of the medical services takes place in the Netherlands, based on article 45 VD which covers
B2C transactions. The article provides that the place of supply will be the place where the supplier has
established its business. Based on article 193 VD the person liable to pay the VAT is the hospital.
However, there is an exemption right regarding the medical and hospital care based on article 132 (1) (b)
VD. The exemption covers medical care provided to persons, for diagnosis and treatment purposes or
activities closely related to these.

Regarding the laundry service provided to the patients; this transaction shall not be subject to VAT
exemption. Its purpose does not fall within the scope of the exemptions of article 132 (1) (b –c) VD. The
aim of this supply is not essential to the medical and hospital treatment and its basic goal is the obtainment
of additional income. Hence, based on article 134 VD, the laundry service is not subject to VAT
exemption. According to article 193 VD, the hospital is liable to pay VAT.

The hospital hires staff (nurses) from another hospital. This supply could be considered as supply falling
within the exemption of article 132 (1) (b) VD provided that the nurses are used for taking care of the
patients. However, if they are used for the laundry services only, this will not constitute a closely related
service (Diagnostiko case). The supply of the staff does not fall within the exemption of article 132 (1) (k)
as the Belgian hospital is not a religious or philosophical institution and the functions of the nurses do not
provide spiritual welfare. Article 196 VD, it is the Dutch hospital who is liable to pay VAT based on the
reversed charge mechanism. There is a right of deduction according to article 168 VD.

In regard to the purchase of the laundry machine, the hospital engages into a B2B supply of goods. Based
on article 14 VD the supply of goods is the transfer of a right to dispose as owner over tangible property.
This is also a taxable transaction based on article 2 (1) (a) VD. The place of supply in this case is

2
determined based on article 32VD, which points towards the place where the transport begins. If we
assume that the machine was bought from a supplier in the Netherlands, then this will be the place of
supply. The hospital would not be able to exempt this input VAT. According to article 193 VD the
supplier of the good is the one who is liable to pay VAT.

Question 2

a.FunDay BV is a taxable person within the meaning of article 9 VD. It is any person, established in any
place. It independently performs economic activities. Independent means that the activities are not
performed under a contract of employment (article 10 VD). Furthermore, it is FunDay BV that bears the
economic risks. Furthermore, economic activity means any activity of producers, traders or persons
supplying services. Therefore, FunDay BV qualifies as a taxable person.

The cards which FunDay sells can be regarded as a supply of goods pursuant to article 14 VD. The article
states that a supply of goods includes the transfer of the right to dispose of tangible property as owner. The
sale of the cards fulfills these requirements. The supply of goods is a taxable transaction based on article 2
(1) (a) VD.

The place of supply should be determined by applying article 31 VD. According to it, the place of supply
will be the place where the goods are located at the time when the supply takes place – most probably the
place where the premises of the shop are located.

The taxable amount would be the value of the cards sold – article 73 VD.

Based on article 193 VD it is FunDay BV who is liable to pay the VAT. The supply is not subject to any
exemptions. FunDay BV can deduct any expenses which it incurs in respect to its business activities
pursuant to article 168 VD.

b. Concerning the taxable amount, article 73 VD provides that a taxable amount for supply of goods or
services shall comprise of everything that constitutes consideration obtained or to be obtained by the
supplier in return for the supply. Therefore, the FunDay cards which Peter and Lola paid with should be
considered as part of the taxable amount. So 30 euro in FunDay cards and 10 euro in cash.

Question 3

1. The transaction consists of two supplies – supply of goods (the machine) and a supply of services (the
installation). According to the main rule these should be treated as separate supplies (Card Protection
Plan case). However, there is an exception to the rule. According to the Deutsche Bank case if one of the
supplies is ancillary it can be absorbed by the main supply. Furthermore, according to Card Protection
Plan case, a service must be regarded as ancillary to the principal service if it does not constitute for
customers an aim in itself, but a means of better enjoying the principal service supplied. The transaction
falls within article 14 (2b) VD which refers to supply of goods on deferred terms.

According to article 63 VD, the VAT is due on date when the good is delivered. Therefore, the two
supplies should be treated a single supply. The taxable amount of the transaction will be determined based
on article 73 VD and will include everything that constitutes consideration for the supply. According to
article 193 VD it is the supplier who is liable to pay the VAT; there are no exemptions or deductions
applicable to the supply.

3
2. In the first case, the taxable amount will be comprised of the payment made by the old lady and the
other customer (article 73 VD). However, the fact that the price of the bread was partly covered by the
other customer does not mean that he will become the consumer. The transaction is between the old lady
and the bakery. Based article 193 VD the bakery is the one liable to pay VAT. There is no deduction right
or exemptions.

In the second case the taxable amount comprises of the subsidy and the price paid by the consumers.
Based on article 73 VD, subsidies directly linked to the price of the supply are to be included in the
taxable amount for the supply of goods. The transaction will be regarded as being between the bakery and
the customer. Based on article 193 VD, the bakery is liable to pay VAT. There is no deduction right or
exemptions.

In both cases we have supply of goods in a B2C setting, the place of supply is the bakery shop – article 31
VD, the taxable amount comprises of two payments but only one person is considered as the recipient of
the good, in both cases the VAT liability is with the bakery and there are no deductions.