C-400/18 Infohos

JUDGMENT OF THE COURT (Second Chamber)

20 November 2019 ( *1 )

(Reference for a preliminary ruling – Taxation – Value added tax (VAT) – Sixth Directive 77/388/EEC – Article 13A(1)(f) – Exemptions – Services supplied by independent groups of persons – Services provided to members and non-members)

In Case C‑400/18,

REQUEST for a preliminary ruling under Article 267 TFEU from the Hof van Cassatie (Court of Cassation, Belgium), made by decision of 19 April 2018, received at the Court on 18 June 2018, in the proceedings

Infohos

v

Belgische Staat,

THE COURT (Second Chamber),

composed of A. Arabadjiev, President of the Chamber, P.G. Xuereb (Rapporteur), T. von Danwitz, C. Vajda and A. Kumin, Judges,

Advocate General: G. Pitruzzella,

Registrar: A. Calot Escobar,

having regard to the written procedure,

after considering the observations submitted on behalf of:

Infohos, by F. Soetaert, advocaat,

the Belgian Government, by J.‑C. Halleux, P. Cottin and C. Pochet, acting as Agents,

the Portuguese Government, by L. Inez Fernandes, R. Campos Laires, P. Barros da Costa and J. Marques, acting as Agents,

the European Commission, by L. Lozano Palacios and W. Roels, acting as Agents,

after hearing the Opinion of the Advocate General at the sitting on 11 July 2019,

gives the following

Judgment

Legal context and the dispute

1This request for a preliminary ruling concerns the interpretation of Article 13A(1)(f) of Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes – Common system of value added tax: uniform basis of assessment (OJ 1977 L 145, p. 1) (‘the Sixth Directive’).

2The request has been made in the course of proceedings between Infohos and the Belgische Staat (Belgian State) concerning an adjustment of value added tax (VAT) for 2002 to 2004.

Legal framework

EU law

3The Sixth Directive was repealed and replaced, from 1 January 2007, by Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax (OJ 2006 L 347, p. 1). However, given the material time in the main proceedings, the case is still governed by the Sixth Directive.

4The ninth and eleventh recitals of the Sixth Directive stated:

‘Whereas the taxable base must be harmonised so that the application of the Community rate to taxable transactions leads to comparable results in all the Member States;

…

Whereas a common list of exemptions should be drawn up so that the Communities’ own resources may be collected in a uniform manner in all the Member States’.

5Article 2 of the Sixth Directive provided:

‘The following shall be subject to value added tax:

1the supply of goods or services effected for consideration within the territory of the country by a taxable person acting as such;

…’

6Article 13 of the Sixth Directive, entitled ‘Exemptions within the territory of the country’, provided:

‘A. Exemptions for certain activities in the public interest

1. Without prejudice to other Community provisions, Member States shall exempt the following under conditions which they shall lay down for the purpose of ensuring the correct and straightforward application of the exemptions and of preventing any possible evasion, avoidance or abuse:

…

services supplied by independent groups of persons whose activities are exempt from or are not subject to value added tax, for the purpose of rendering their members the services directly necessary for the exercise of their activity, where these groups merely claim from their members exact reimbursement of their share of the joint expenses, provided that such exemption is not likely to produce distortion of competition;

…’

7Article 13A(1)(f) of the Sixth Directive corresponds to Article 131 and to Article 132(1)(f) of Directive 2006/112.

Belgian law

8Article 44(2)(1a) of the VAT Code, in the version applicable to the facts at issue in the main proceedings, provided for exemption from VAT in the case of ‘the supply of services to their own members by independent groups of persons that carry on an activity which is exempted under this article or in relation to which they are not taxable persons, where those services are directly necessary for the carrying on of that activity and where the groups undertake to claim from their members only the exact reimbursement of the share of joint expenses for which each member is liable, provided that that exemption is not likely to cause distortion of competition; the King shall stipulate the conditions for the application of this exemption’.

9Article 2 of Koninklijk Besluit nr. 43 met betrekking tot de vrijstelling op het stuk van de belasting over de toegevoegde waarde ten aanzien van de door zelfstandige groeperingen van personen aan hun leden verleende diensten (Royal Decree No 43 on the exemption from value added tax of supplies of services by independent groups of persons to their members), of 5 July 1991 (Belgisch Staatsblad, 6 August 1991, p. 17215), provided:

‘The supply of services to their own members by independent groups of persons governed by Article 1 shall be exempt from tax provided that:

1. The activities of the group consist exclusively in the supply of services directly in the interest of the members themselves and all the members carry on an activity that is exempt under Article 44 of the [VAT] Code or in respect of which they are not taxable persons’.

The dispute in the main proceedings and the question referred for a preliminary ruling

10Infohos is an association which specialises in hospital information technology. It supplies hospital IT services firstly to hospitals which are affiliated to it as members and, secondly, to non-members.

11On 5 September 2000, it concluded a cooperation agreement with IHC-Group NV for the joint development, but on the instructions of Infohos, of new or innovative software applications for the hospitals affiliated to it as members.

12Infohos did not register itself as a taxable person for VAT purposes on the ground that it considered that it could not be regarded as such under Article 6 of the VAT Code, or that, at the very least, it was exempt under Article 44(2)(1a) of that code.

13Following a tax inspection on 20 April 2005 by the Belgian tax authorities, those authorities considered that the services which Infohos and IHC-Group had provided to each other should be subject to VAT. Moreover, according to the tax authorities, the fact that taxable transactions had been performed for non-members meant that the transactions performed for members of Infohos should also be subject to VAT since Infohos was no longer entitled to benefit from the exemption under Article 44(2)(1a) of the VAT Code for the services provided to its members.

14On 13 December 2005, the tax authorities drew up a record identifying those infringements and, subsequently, issued a summons for payment, which was declared enforceable.

15On 22 May 2007, by an inter partes application lodged at the rechtbank van eerste aanleg Brugge (Court of First Instance, Bruges, Belgium), Infohos requested that that court declare that application admissible and well founded and, therefore, that it suspend the execution of the summons issued by the tax authorities, rule that the sums requested were not payable and, in the alternative, order the waiver of the fines imposed or, at the very least, reduce them substantially, order the reimbursement of all sums collected under that summons, together with default interest, and order the Belgian State to pay the costs.

16By judgment of 23 February 2009, the rechtbank van eerste aanleg Brugge (Court of First Instance, Bruges) held that the conditions for applying the exemption under Article 44(2)(1a) of the VAT Code were not satisfied and that Infohos was liable for VAT in respect of all the services it had provided to both members and non-members.

17Infohos brought an appeal against that judgment before the hof van beroep te Gent (Court of Appeal, Ghent, Belgium).

18By judgment of 21 September 2010, that court held that Infohos could not rely on the exemption under Article 44(2)(1a) of the VAT Code as this would distort competition. Moreover, it held that, as a hybrid taxable person for the purposes of Article 46 of the VAT Code, Infohos was entitled to bring an action for compensation against the Belgian State.

19The tax authorities then brought an appeal on a point of law before the Hof van Cassatie (Court of Cassation, Belgium).

20By judgment of 31 October 2014, that court set aside the judgment of the hof van beroep te Gent (Court of Appeal, Ghent) on the ground that it was contradictory to hold, on the one hand, that Infohos could not invoke Article 44(2)(1a) of the VAT Code and that it therefore had to be regarded as a fully taxable person, and, on the other, that it could rightly claim that it was a hybrid taxable person.

21The Hof van Cassatie (Court of Cassation) referred the case to the hof van beroep te Antwerpen (Court of Appeal, Antwerp, Belgium).

22By judgment of 20 September 2016, the latter court held that Infohos could not rely on the exemption under Article 44(2)(1a) of the VAT Code since it also supplied services to non-members.

23Infohos brought an appeal on a point of law against that judgment before the Hof van Cassatie (Court of Cassation) on the ground, inter alia, that the condition for applying the exemption from VAT, contained in Article 2(1) of Royal Decree No 43, in accordance with which the independent group of persons could provide services exclusively to its own members, was not contained in Article 13A(1)(f) of the Sixth Directive and was therefore contrary to that provision.

24The referring court notes that the hof van beroep te Antwerpen (Court of Appeal, Antwerp) held that it followed from a narrow interpretation of Article 13A(1)(f) of the Sixth Directive – and, in particular, of the condition, laid down in that provision, that independent groups of persons merely claim from their members exact reimbursement of their share of the joint expenses – that that provision excluded services also being provided by those groups to persons who were not members. The hof van beroep te Antwerpen (Court of Appeal, Antwerp) also considered that, since it did not confine itself to providing services to its members, but also sold marketing application software to third parties, Infohos could not rely on the exemption for any of its activities.

25The dispute that has thus arisen cannot be resolved, according to the referring court, without an interpretation of Article 13A(1)(f) of the Sixth Directive.

26In those circumstances, the Hof van Cassatie (Court of Cassation) decided to stay the proceedings and to refer the following question to the Court for a preliminary ruling:

‘Must Article 13A(1)(f) of [the Sixth Directive], now Article 132(1)(f) of [Directive 2006/112], be interpreted as permitting Member States to attach an exclusivity condition to the exemption provided for therein, whereby an independent group which also supplies services to non-members is also liable in full to VAT for the services supplied to its members?’

The question referred for a preliminary ruling

27By its question, the referring court asks, in essence, whether Article 13A(1)(f) of the Sixth Directive must be interpreted as meaning that it precludes a provision of national law, such as that at issue in the main proceedings, which makes the grant of exemption from VAT subject to the condition that independent groups of persons supply services exclusively to their members, with the result that such groups which also supply services to non-members are liable in full to VAT, including for the services they supply to their members.

28In order to answer that question, it should be recalled that, under Article 13A(1)(f) of the Sixth Directive, Member States are to exempt – under conditions which they are to lay down for the purposes of ensuring the correct and straightforward application of the exemptions provided for in that provision and of preventing any possible evasion, avoidance or abuse – services supplied by independent groups of persons whose activities are exempt from or are not subject to value added tax, for the purpose of rendering to their members the services directly necessary for the exercise of their 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 produce distortion of competition.

29In that regard, it is clear from the ninth and eleventh recitals of the Sixth Directive that the directive is designed to harmonise the basis of assessment of VAT and that the exemptions from that tax constitute independent concepts of EU law which, as the Court has held, must be placed in the general context of the common system of VAT introduced by that directive (judgment of 11 December 2008, Stichting Centraal Begeleidingsorgaan voor de Intercollegiale Toetsing, C‑407/07, EU:C:2008:713, paragraph 29 and the case-law cited).

30It is, moreover, settled case-law that the terms used to specify the exemptions set out in Article 13 of the Sixth Directive are to be interpreted strictly, since they constitute exceptions to the general principle that VAT is to be levied on all services supplied for consideration by a taxable person. Nevertheless, the interpretation of those terms must be consistent with the objectives pursued by those exemptions and comply with the requirements of the principle of fiscal neutrality inherent in the common system of VAT. Thus, the requirement of strict interpretation does not mean that the terms used to specify the exemptions referred to in Article 13 should be construed in such a way as to deprive the exemptions of their intended effect. It is not the purpose of the case-law of the Court to impose an interpretation which would make the exemptions more or less inapplicable in practice (judgment of 11 December 2008, Stichting Centraal Begeleidingsorgaan voor de Intercollegiale Toetsing, C‑407/07, EU:C:2008:713, paragraph 30 and the case-law cited).

31As regards the wording of Article 13A(1)(f) of the Sixth Directive, as mentioned in paragraph 28 of this judgment, the exemption laid down in that provision covers the supply of services by independent groups of persons to their members. However, it is not apparent from that wording that the supply of services by such groups to their members are excluded from that exemption where, in addition, those groups also supply services to non-members.

32Thus, although, according to that provision, that exemption may be granted only in respect of the supply of services by independent groups of persons to their members, it cannot be inferred from its wording that it may be applied only if those groups are required to provide services only for their members.

33According to settled case-law, in interpreting a provision of EU law it is necessary to consider not only its wording but also the context in which it occurs and the objectives pursued by the rules of which it is part (judgment of 3 October 2019, Wasserleitungsverband Nördliches Burgenland and Others, C‑197/18, EU:C:2019:824, paragraph 48).

34As regards the context of Article 13A(1)(f) of the Sixth Directive, it must be pointed out that Article 13A of that directive is entitled ‘Exemptions for certain activities in the public interest’ and is in Title X of that directive which deals with exemptions. That heading indicates that the exemption provided for in Article 13A(1)(f) of that directive covers only independent groups of persons whose members carry on activities in the public interest (see, to that effect, judgment of 21 September 2017, Commission v Germany, C‑616/15, EU:C:2017:721, paragraph 44).

35It is not clear from that context whether that exemption is confined only to independent groups of persons which supply services exclusively to their members.

36As regards the purpose of Article 13A(1)(f) of the Sixth Directive, it must be recalled that it is clear from the case-law of the Court that that provision seeks to create an exemption from VAT in order to avoid an entity offering certain services being required to pay that tax when it has found it necessary to cooperate with other entities by means of a common structure set up to undertake activities essential to the provision of those services (judgment of 11 December 2008, Stichting Centraal Begeleidingsorgaan voor de Intercollegiale Toetsing, C‑407/07, EU:C:2008:713, paragraph 37).

37Therefore, it must be considered that the aim of the provisions contained in Article 13A(1) of the Sixth Directive, as a whole, is to exempt from VAT certain activities in the public interest with a view to facilitating access to certain services and the supply of certain goods by avoiding the increased costs that would result if they were subject to VAT (see, to that effect, judgments of 5 October 2016, TMD, C‑412/15, EU:C:2016:738, paragraph 30, and of 21 September 2017, Aviva, C‑605/15, EU:C:2017:718, paragraph 28).

38In accordance with the national provision at issue in the main proceedings, the exemption from VAT provided for in Article 13A(1)(f) of the Sixth Directive is systematically refused in respect of the supply of services to their own members by independent groups of persons when those groups also supply services to non-members and therefore all of the services are subject to VAT.

39However, although an independent group of persons, such as Infohos, also supplies services to non-members, the fact remains that the services it supplies to its members contribute directly to the exercise of activities in the public interest referred to in that provision. Supplies of services by an independent group of persons are covered by the exemption laid down in Article 13A(1)(f) of the Sixth Directive where they contribute directly to the exercise of activities in the public interest mentioned in Article 13A(1) of the Sixth Directive.

40In those circumstances, it must be found that the act of refusing to grant an independent group of persons, which meets all of the conditions laid down in Article 13A(1)(f) of the Sixth Directive, the exemption referred to in that provision solely because it also supplies services to non-members would restrict the scope of that provision by excluding from the exemption from VAT services supplied by that group to its members, and such a restriction of the scope of that provision is not supported by the purpose of that directive, as recalled in paragraph 36 of this judgment (see, by analogy, judgment of 11 December 2008, Stichting Centraal Begeleidingsorgaan voor de Intercollegiale Toetsing, C‑407/07, EU:C:2008:713, paragraphs 36 and 37).

41Thus, the application of that provision to the supply of services by an independent group of persons directly to its own members, who must carry out an activity which is exempt from VAT or in relation to which they are not taxable persons, is consistent with the objective of Article 13A(1)(f) of the Sixth Directive since that objective does not prevent a group of that kind from supplying services to non-members.

42That being the case, in accordance with Article 13A(1)(f) of the Sixth Directive, only the supply of services to members of the independent group of persons is exempt, since those services are supplied within the framework of the objectives for which such a group has been set up and are therefore provided in accordance with the purpose of that group (see, to that effect, judgment of 11 December 2008, Stichting Centraal Begeleidingsorgaan voor de Intercollegiale Toetsing, C‑407/07, EU:C:2008:713, paragraph 39). In that regard, it is for the referring court to ascertain whether the supply of services by Infohos satisfies all of the conditions laid down in Article 13A(1)(f) of the Sixth Directive.

43By contrast, the supply of services to non-members may not benefit from that exemption and remains subject to VAT. Since the supply of those services does not fall within the scope of the exemption set out in Article 13A(1)(f) of the Sixth Directive, Article 2(1) of that directive requires that the supply of those services, effected for consideration within the territory of a Member State by a taxable person acting as such, is subject to VAT.

44Therefore, in the light of the wording and the purpose of Article 13A(1)(f) of the Sixth Directive, the exemption from VAT provided for therein is not subject to the condition that the supply of services concerned is offered exclusively to members of the independent group of persons concerned.

45The Belgian Government submits that Article 13A(1)(f) of the Sixth Directive does not preclude the national legislation at issue in the main proceedings in so far as that legislation seeks to prevent any distortion of competition in accordance with the condition laid down in Article 13A(1)(f) of the Sixth Directive.

46It should be recalled that, under Article 13A(1)(f) of the Sixth Directive, the exemption laid down in that provision is to apply provided that it is not likely to cause distortion of competition.

47In that regard, the Court has already held that it is the VAT exemption in itself which must not be liable to give rise to distortions of competition on a market in which competition will in any event be affected by the presence of an operator which provides services for its members and which is prohibited from seeking profits. It is thus the fact that the provision of services by a group is exempt, and not the fact that this group satisfies the other conditions of the provision in question, which must be liable to give rise to distortions of competition in order that this exemption may be refused (judgment of 20 November 2003, Taksatorringen, C‑8/01, EU:C:2003:621, paragraph 58).

48Accordingly, the Court has held that the grant of VAT exemption must be refused if there is a genuine risk that the exemption may by itself, immediately or in the future, give rise to distortions of competition (judgment of 20 November 2003, Taksatorringen, C‑8/01, EU:C:2003:621, paragraph 64).

49In order to determine whether the application of the exemption mentioned in Article 13A(1)(f) of the Sixth Directive to a specific activity is likely to cause distortion of competition, it is certainly possible for the national legislature to lay down rules which are easily managed and supervised by the competent authorities (see, to that effect, judgment of 21 September 2017, Commission v Germany, C‑616/15, EU:C:2017:721, paragraph 65).

50However, the condition relating to the absence of distortion of competition, mentioned in that provision, does not allow the scope of the exemption laid down therein to be limited in a general manner (see, to that effect, judgment of 21 September 2017, Commission v Germany, C‑616/15, EU:C:2017:721, paragraph 67).

51That is precisely the effect of the national provision at issue in the main proceedings, which establishes a general presumption as to the existence of a distortion of competition and limits, in a general manner, the scope of the exemption provided for in Article 13A(1)(f) of the Sixth Directive by excluding from the exemption from VAT services supplied by independent groups of persons to their members when those groups also supply services to non-members, whereas, as is clear from paragraph 43 of this judgment, those services to non-members do not fall within the scope of that exemption and must therefore be subject to VAT.

52Moreover, the Belgian Government submits that the national provision at issue in the main proceedings enables the prevention of any possible evasion, avoidance or abuse.

53In that regard, it is sufficient to note that although, according to the introductory words of Article 13A(1) of the Sixth Directive, Member States are to lay down the conditions for exemptions in such a way as to ensure the correct and straightforward application of those exemptions and to prevent any possible evasion, avoidance or abuse, those conditions cannot affect the substantive definition of the exemptions (judgment of 15 November 2012, Zimmermann, C‑174/11, EU:C:2012:716, paragraph 39). That is precisely the effect of the conditions provided for in the national legislation at issue in the main proceedings which establish, in respect of independent groups of persons which also supply services to non-members, a general and irrebuttable presumption of tax evasion, avoidance or abuse, but do not, however, identify precisely the type of tax evasion, avoidance or abuse that that legislation seeks to prevent.

54In the light of all the foregoing considerations, the answer to the question referred must be that Article 13A(1)(f) of the Sixth Directive must be interpreted as meaning that it precludes a provision of national law, such as that at issue in the main proceedings, which makes the grant of exemption from VAT subject to the condition that independent groups of persons provide services exclusively to their members, with the result that such groups which also supply services to non-members are liable in full to VAT, including for the services they supply to their members.

Costs

55Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable.

Operative part

On those grounds, the Court (Second Chamber) hereby rules:

Article 13A(1)(f) of Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes – Common system of value added tax: uniform basis of assessment must be interpreted as meaning that it precludes a provision of national law, such as that at issue in the main proceedings, which makes the grant of exemption from value added tax (VAT) subject to the condition that independent groups of persons supply services exclusively to their members, with the result that such groups which also supply services to non-members are liable in full to VAT, including for the services they supply to their members.

Signatures

[Signatures]

( *1 ) Language of the case: Dutch.

OPINION OF ADVOCATE GENERAL

PITRUZZELLA

Delivered on 11 July 2019 ¹

(Reference for a preliminary ruling — VAT — Exemptions — Independent groups of persons — Supplies of services to members and non-members)

1Does an independent group of persons that comprises a number of Public Centres for Social Welfare, to which the group provides services of public interest, lose its VAT-exempt status with regard to the services which it provides to those members if it decides also to provide services to third parties?

2That is, in essence, the question raised by the Belgian national court, which is asking the Court of Justice to assess the compatibility with EU law of a provision of national law which makes a VAT exemption for independent groups of persons that comprise Public Centres for Social Welfare subject to the condition that they provide services exclusively to members.

I. Legal framework

A. EU law

3Article 13 of Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonization of the laws of the Member States relating to turnover taxes — Common system of value added tax: uniform basis of assessment, ² which deals with exemptions within the territory of the country, provides:

‘A. Exemptions for certain activities in the public interest

1. Without prejudice to other Community provisions, Member States shall exempt the following under conditions which they shall lay down for the purpose of ensuring the correct and straightforward application of such exemptions and of preventing any possible evasion, avoidance or abuse:

…

services supplied by independent groups of persons whose activities are exempt from or are not subject to value added tax, for the purpose of rendering their members the services directly necessary for the exercise of their activity, where these groups merely claim from their members exact reimbursement of their share of the joint expenses, provided that such exemption is not likely to produce distortion of competition’.

4Article 13A(1)(f) of the Sixth Directive corresponds to Article 132(1)(f) of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax, ³ which repeals and replaces Directive 77/388. However, despite that repeal, the Sixth Directive applies in this instance, since the facts of the case in the main proceedings predate the entry into force of Directive 2006/112.

B. Belgian law

5Article 44(2)(1a) of the Btw-wetboek (Belgian VAT Code) (‘the VAT Code’), in the version applicable to the facts of the case, provides for VAT exemption in the case of:

‘The supply of services to their own members by independent groups of persons that carry on an activity which is exempted under this article or in relation to which they are not taxable persons, where those services are directly necessary for the carrying on of that activity and where the groups undertake to claim from their members only the exact reimbursement of the share of joint expenses for which each member is liable, provided that that exemption is not likely to cause distortion of competition; the King shall stipulate the conditions for the application of this exemption’.

6Article 2 of Koninklijk Besluit nr. 43 van 5 juli 1991 met betrekking tot de vrijstelling op het stuk van de belasting over de toegevoegde waarde ten aanzien van de door zelfstandige groeperingen van personen aan hun leden verleende diensten (Royal Decree No 43 of 5 July 1991 on the exemption from value added tax of supplies of services by independent groups of persons to their members) (Belgische Staatsblad, 6 August 1991) (‘the Royal Decree’) provides:

‘The supply of services to their own members by independent groups of persons governed by Article 1 shall be exempt provided that:

1The activities of the group consist exclusively in the provision of services directly in the interest of the members themselves and all the members carry on an activity that is exempt under Article 44 of the [VAT] Code or in respect of which they are not taxable persons’.

II. The facts, the main proceedings and the question referred for a preliminary ruling

7Infohos, the appellant in the main proceedings, is an association for health and hospital informatics that was set up by various Openbare centra voor maatschappelijk welzijn (Public Centres for Social Welfare) (‘PCSWs’). ⁴ Infohos provides hospital information technology services to its affiliated PCSWs. In addition to the services which it provides to its own members, it also provides services to non-members. On 5 September 2000 it concluded an agreement with IHC-Group NV for the joint development, at the behest of Infohos, of new or innovative software applications for the hospitals affiliated to it as members.

8Infohos did not register itself as a taxable person for VAT purposes, since it considered that it could not be regarded as such under Article 6 of the VAT Code ⁵ and that it was, in any event, exempt under Article 44(2)(1a) of that code.

9On 20 April 2005, following a tax inspection, the Belgian tax authorities decided that the services which Infohos and IHC-Group NV (which was not a member of the group) had provided to each other were subject to VAT. Moreover, according to the tax authorities, the fact that taxable transactions had been performed for non-members meant that even the transactions performed for members of Infohos were subject to VAT and that Infohos was therefore no longer entitled to benefit from the exemption under Article 44(2)(1a) of the VAT Code for services provided to its own members.

10On 13 December 2005 the tax authorities set out that finding in an official report and, on the basis of that report, a summons to pay was issued which was declared enforceable.

11On 22 May 2007, by document lodged at the Rechtbank van eerste aanleg Brugge (Court of First Instance, Bruges, Belgium), Infohos challenged the summons to pay and sought the stay of its execution. It also sought a declaration that the sums requested were not payable. In the alternative, it sought an order for the annulment of the fines imposed, or at least a substantial reduction in those fines, the reimbursement of all the sums collected pursuant to the summons to pay, together with interest, and an order for the defendant to pay the costs.

12By judgment of 23 February 2009, the court of first instance held that the conditions for applying the exemption under Article 44(2)(1a) of the VAT Code were not satisfied and that the appellant was liable for VAT in respect of all the services that it had provided, to members and non-members alike.

13Infohos brought an appeal against that judgment before the Hof van Beroep te Gent (Court of Appeal, Ghent, Belgium). By judgment of 21 September 2010, that court held that Infohos could not rely on the exemption under Article 44(2)(1a) of the VAT Code because it had also provided services to non-members and applying the exemption would therefore have distorted competition. Nevertheless, it also held that, as a hybrid taxable person, Infohos could claim reimbursement from the Belgian State, in the sum of EUR 117 781.03.

14On 5 July 2012 the tax authorities brought an appeal on a point of law before the Hof van Cassatie (Court of Cassation, Belgium). By judgment of 31 October 2014, the Hof van Cassatie (Court of Cassation) set aside the judgment of the Hof van Beroep te Gent (Court of Appeal, Ghent) on the ground that it is contradictory to assert, on the one hand, that Infohos cannot invoke Article 44(2)(1a) of the VAT Code because it provides services not only to its members but also to non-members, which implies that it is a fully taxable person, and, on the other, that it can claim that it is a hybrid taxable person, within the meaning of Article 46 of the VAT Code, and thus entitled to benefit from the exemption in respect of the services provided to its members, in proportion to the supply of services to non-members, with a right to deduct restricted to the taxable supplies made to non-members.

15The Hof van Cassatie (Court of Cassation) referred the case to the Hof van Beroep Antwerpen (Court of Appeal, Antwerp, Belgium). By judgment of 20 September 2016, that court held that the granting of permission to sell for consideration software applications belonging either exclusively to the appellant or jointly in undivided shares to the appellant and IHC-Group NV comes within the scope of Article 18(1)(2)(7) of the VAT Code and that the supply in question must therefore be regarded as taxable. It also held that, since Infohos does not confine itself to providing services to its members, but also — through IHC‑Group NV, with which it has concluded a cooperation agreement — sells to non-members software applications developed either by itself or at its behest, it is not entitled to rely on the exemption under Article 44(2)(1a) of the VAT Code for any of its activities.

16Infohos then appealed that decision before the Hof van Cassatie (Court of Cassation), arguing that the condition for applying the exemption stipulated in Article 2(1) of the Royal Decree, which is that the independent group of persons (‘IGP’) ⁶ may provide services exclusively to its own members, is not laid down in Article 13A(1)(f) of the Sixth Directive and the provision of national law is therefore not compatible with EU law.

17The referring court, the Hof van Cassatie (Court of Cassation) notes that the Hof van Beroep Antwerpen (Court of Appeal, Antwerp) held that a narrow interpretation of Article 13A(1)(f) of the Sixth Directive and, in particular, of the condition, laid down in that provision, that IGPs may claim from their members only the exact reimbursement of their share of the joint expenses, means that services cannot also be provided to non-members. In addition, since Infohos did not confine itself to providing services to its members, but also sold marketing application software to third parties, it could not rely on the exemption for any of its activities.

18The issue that has thus arisen can be resolved, according to the national court, only by means of interpretation of Article 13A(1)(f) of the Sixth Directive.

19The Hof van Cassatie (Court of Cassation, Belgium) therefore stayed the proceedings and referred the following question to the Court of Justice for a preliminary ruling:

‘Must Article 13A(1)(f) of Directive 77/388/EEC of 17 May 1977, now Article 132(1)(f) of Directive 2006/112/EC of 28 November 2006, be interpreted as permitting Member States to attach an exclusivity condition to the exemption provided for therein, whereby an independent group which also supplies services to non-members is also fully liable for VAT for the services supplied to its members?’

III. Legal analysis

20By its request for a preliminary ruling, the referring court asks, in essence, whether Article 13A(1)(f) of the Sixth Directive precludes national legislation, such as the Belgian legislation at issue, pursuant to which exemption from the payment of VAT for IGPs applies only if IGPs provide services exclusively to group members.

21If that is not the case, and a national provision of that kind is considered to be compatible with EU law, it would then follow that, in every instance in which an IGP supplies services also to persons that are not members, the IGP would be liable for VAT even in respect of services supplied to its own members.

22The status of the appellant in the main proceedings as an IGP and the fulfilment, with regard to its activities — at least those which it carries on for its own members – of the criteria laid down in Article 13A(1)(f) of the Sixth Directive, and thus of the prerequisites for the services supplied to be exempt from the payment of VAT, are not specifically in dispute. Both these points may therefore be regarded as established in the present case. In any event, it is for the national court to ascertain whether, in the particular circumstances of the case, the conditions laid down in Article 13A(1)(f) of the Sixth Directive are satisfied. ⁷

23Moreover, I would add that the national court is also required to assess whether the offer of services to non-members is in line with the IGP’s social objective. Indeed, if activities for non-members fall outside the scope of the IGP’s objective, then the consequences of that must be assessed on the basis of national law.

24In essence, two different answers to the question referred for a preliminary ruling are proposed by the interested parties that have submitted observations in these proceedings.

25The first, proposed by the European Commission and the appellant in the main proceedings, is in the negative and thus suggests that a provision of national legislation, such as the provision of Belgian legislation at issue, pursuant to which exemption from VAT is conditional on the group’s services being offered exclusively to members, is incompatible with EU law.

26In particular, that view rests on the premiss that to exclude IGPs which also supply services to non-members from the exemption laid down in Article 13A(1)(f) of the Sixth Directive would reflect an excessively narrow interpretation of that provision and thus make it difficult, if not impossible, to implement the exemption.

27I would make clear in this regard that the supply of services to third parties by an IGP would be permissible only if it were subject to normal taxation (unless the services were exempt for some other reason), in accordance with Article 2 of the Sixth Directive, which defines the scope of that directive.

28According to this first view, the freedom to supply services to persons outside the group cannot, therefore, be called into question by any additional exclusivity condition unconnected with the content of Article 13A(1)(f) of the Sixth Directive.

29The second view, put forward by the Belgian Government and the Portuguese Government, is that the question referred should be answered in the affirmative and that a provision of national legislation, such as the provision of Belgian legislation at issue, pursuant to which exemption from VAT is conditional on the group’s services being offered exclusively to members, is compatible with EU law.

30It is argued that the need for exclusivity flows from the provision itself, in that it stipulates, inter alia, that the exemption is to be granted unless it would produce distortion of competition, which would arise in the event of services being supplied to third parties, given that an IGP is principally created for the sole purpose of offering services to its members.

31It is also argued that the role of the exclusivity condition is to ensure the proper implementation of the principle of fiscal neutrality.

32The first of these two views seems the more persuasive to me, as I shall further clarify.

33It is necessary, in the first place, to ascertain whether the introduction of such an exclusivity condition is consistent with a literal, systematic and teleological interpretation of Article 13A(1)(f) of the Sixth Directive, ⁸ and, in the second place, to ascertain whether the Member States have any discretion in introducing such a condition.

A. Interpretation of Article 13A(1)(f) of the Sixth Directive by reference to the aims of that directive and the purpose of the exemptions

34The wording of Article 13A(1)(f) of the Sixth Directive contains no mention whatsoever of any requirement for the services to be supplied exclusively to the group’s own members.

35According to the settled case-law of the Court, VAT exemptions — which, as I will explain in point 41 below, are autonomous concepts of EU law — must be interpreted strictly, since they constitute exceptions to the general principle that VAT is to be levied on all services supplied for consideration by a taxable person.

36However, that strict interpretation on the part of the Member State when transposing the directive must not go so far as to render implementation of the scheme of exemptions so excessively difficult as to rob them of their effect as autonomous concepts. ⁹

37Therefore, it is necessary to consider the underlying purpose of Article 13A(1)(f) of the Sixth Directive.

38The purpose of the Sixth Directive on VAT ¹⁰ is to harmonise national laws so as to establish a common system of value added tax and, thus, a uniform basis of assessment.

39That objective is further specified in the ninth recital of that directive in the following terms: ‘Whereas the taxable base must be harmonised so that the application of the Community rate to taxable transactions leads to comparable results in all the Member States’. ¹¹

40Indeed, as the eleventh recital of the Sixth Directive goes on to state, ‘a common list of exemptions should be drawn up so that the Communities’ own resources may be collected in a uniform manner in all the Member States’.

41It follows, as the Court has already had occasion to make clear, that the objective of the uniform collection of the Communities’ own resources in all the Member States can be attained only if the exemptions are interpreted and applied in a harmonised fashion, which means that they must be conceived of as autonomous concepts of EU law. ¹²

42More specifically, Article 13A(1)(f) of the Sixth Directive lays down a VAT exemption of which certain IGPs may avail themselves, namely those which operate a self-help system, or in other words, groups whose objective is to provide their members with the services that are directly necessary for the pursuit of their activities (which must be exempt from or not subject to value added tax) and which confine themselves to claiming from their members exact reimbursement of their share of the joint expenses.

43The purpose of such an exemption is, in fact, ‘to create an exemption from VAT in order to avoid an entity offering certain services from being required to pay that tax when it has found it necessary to cooperate with other entities by means of a common structure set up to undertake activities essential to the provision of those services’ ¹³ and also ‘to exempt from VAT certain activities in the public interest with a view to facilitating access to certain services and the supply of certain goods by avoiding the increased costs that would result if they were subject to VAT’. ¹⁴

44As is apparent from the observations which it has lodged, the Commission has, in the absence of an interpretation of the exemption provision by the Court of Justice, stated in various working papers on VAT that neither the particular nature of the exemption nor the need to interpret it strictly justify any prohibition that precludes persons availing themselves of the exemption from also carrying on activities for third parties (provided that they are subject to taxation). ¹⁵

45It is therefore not apparent either from the underlying purpose of Article 13A(1)(f) of the Sixth Directive or from the exemptions laid down therein that it is necessary to introduce an exclusivity condition with regard to the services offered by IGPs to their own members, and the Commission has stated as much in official documents.

46To conclude on the question of whether a provision such as the Belgian provision at issue is consistent with the aims of the exemption, I would observe that it in any event appears to be too stringent to be proportionate to the objective pursued.

47The Court has on several occasions pointed out that, in accordance with the principle of proportionality, which is one of the general principles of EU law, the means employed for the implementation of the Sixth Directive must be appropriate to achieving the objectives stated in that measure and must not go beyond what is necessary in order to attain them. ¹⁶

48The loss of the exemption even for transactions for the benefit of members, on the other hand, could upset the balance of the provision of EU law with a punitive intention that is alien to the spirit of the directive.

49It would appear to be more correct to focus, in the implementation of the exemption, on the activity that the entity is engaged in, rather than on the nature of the entity itself.

50This means that the exemption must apply solely to services which IGPs supply to their members; it does not mean that IGPs may offer services solely to their members. In that regard, the Court has already held that services supplied by IGPs to their members are covered by the exemption contained in Article 13A(1)(f) of the Sixth Directive, even if those services are supplied to only one or several of those members. ¹⁷

51It is the activity performed for the IGP’s members, for purposes which the provision of EU law seeks to protect, that is deserving of protection, and thus exemption, rather than the nature of the entity, in the sense that it should be treated as attracting exemption only if it offers services exclusively to the members of the group. Naturally, this is subject to the proviso that the national court should ascertain that the entity claiming the exemption meets the requirements laid down in the Sixth Directive. ¹⁸

B. Discretion of the Member States

52Article 13A(1) of the Sixth Directive provides that the Member States are to lay down conditions ‘for the purpose of ensuring the correct and straightforward application of … exemptions … and of preventing any possible evasion, avoidance or abuse’.

53Point (f) thereof adds that the exemption must not be ‘likely to produce distortion of competition’.

54The discretion which the Member States have in laying down the conditions for entitlement to the exemption cannot extend to altering the substantive definition of the exemptions listed in that directive. ¹⁹

55The Member States cannot, therefore, introduce provisions that would deprive the exemption of its substantive content or render its application more difficult or impossible. ²⁰

56Such a situation would arise in the event that, on implementing that directive, a Member State were to adopt stringent measures of a general nature, such as those laid down in Article 2 of the Royal Decree, which restrict the scope of the exemption.

57The intention of the words ‘for the purpose of ensuring the correct and straightforward application of … exemptions’ is, in my view, that the Member States should be able to introduce national regulations that will make it relatively easy for economic operators to apply exemptions and possibly also streamline inspection procedures.

58Those words certainly cannot be construed, as the arguments of some of the parties seem to suggest, as being intended merely to facilitate the inspection tasks of the competent authorities.

59Moreover, there is no indication in the case file of how it might be excessively difficult for the national authorities to apply and monitor the correct application of the exemptions laid down in the directive. ²¹

60It will fall to the national court to ascertain whether persons availing themselves of the exemptions prepare orderly, separate accounts that make it possible for the competent authorities to carry out the necessary checks.

61The wording in Article 13A(1) of the Sixth Directive which I have mentioned does not, however, justify the introduction of a stringent exclusivity condition, which, as I have said, is not covered by the wording of that provision of EU law and would be alien to its underlying purpose.

62The same applies to the other limb of that provision, which permits the Member States to lay down conditions for the purpose ‘of preventing any possible evasion, avoidance or abuse’.

63Those words do not support the conclusion that it is necessary to add a further provision, not contained in the directive, which requires the services to be performed exclusively for members.

64The possible supply of services to third parties cannot be regarded as something which might encourage evasion, avoidance or abuse, provided that any such supply is duly recorded separately in the group’s accounts and is conditional upon payment of the VAT due.

65Lastly, as regards the risk of distortions of competition, this might be more difficult to analyse, but, in my view, the same conclusion may be drawn regarding IGPs’ freedom to supply services also to third parties who are not members.

66The Court has had occasion to clarify that ‘the grant of VAT exemption must be refused if there is a genuine risk that the exemption may by itself, immediately or in the future, give rise to distortions of competition’. ²²

67As Advocate General Kokott has already confirmed, the existence of a distortion of competition cannot be predetermined in the abstract for certain sectors. The Sixth Directive does not, therefore, allow the national legislature any discretion regarding the introduction of an abstract provision that dispenses with an in concreto assessment of the distortion of competition. ²³

68A provision such as the Belgian provision at issue, on the other hand — from what I am given to understand from the case file, inasmuch as the Belgian Government puts forward the possible distortion of competition as the principal reason for the introduction of the exclusivity condition — simply makes the general and rigid assumption, leaving no room for assessment on the court’s part, that the supply of services to third parties distorts competition in the particular market in question.

69The Court has already confirmed that, in order to determine whether the application of the exemption mentioned in Article 132(1)(f) of Directive 2006/112 to a specific activity is likely to cause distortion of competition, it is certainly possible for the national legislature to lay down rules which are easily managed and supervised by the competent authorities. However, those conditions do not concern the definition of the content of the exemptions laid down by that directive, and the condition relating to the absence of distortion of competition, mentioned in Article 132(1)(f) of Directive 2006/112, does not have the consequence of permitting Member States to limit the scope of that exemption in a general manner. ²⁴

70The exemption could give rise to a distortion of free competition if the majority of the services were supplied to persons who are not members or if the services provided to non-members were also exempted from VAT.

71Neither of those situations may be assumed from the interpretation proposed and it must, therefore, be concluded that, on this point too, the arguments in favour of the need for an exclusivity condition — which are not supported by any evidence — are unconvincing.

C. Restrictions on the freedom of IGPs to supply services to third parties who are not members

72The conditions for the application of the exemption under Article 13A(1)(f) of the Sixth Directive may, as noted by the Commission in the observations which it has lodged in this case, be summarised as follows: the services must be supplied by an independent group of persons; the group must be engaged in an activity that is exempt from or not subject to tax; the purpose of the supply must be to provide its own members with services that are directly necessary for the performance of their activities; such groups must merely claim from their members exact reimbursement of their share of the joint expenses.

73All of these conditions must be verified by the national court.

74Bearing in mind the teleological and systematic interpretation I have suggested, I would however clarify that certain additional conditions will apply to the exemption from VAT of services supplied to members in the event that the entity also offers services (subject to VAT) outside the group.

75In the first place, it will be necessary for the services offered to members to be quantitatively predominant by comparison with those supplied to third parties, which should therefore account for no more than a residual part of the group’s activities. ²⁵

76This is to prevent IGPs from deviating from their purpose and also to avert the application of the legislation for tax-avoidance ends, which would be likely to distort competition.

77In the second place, and again so that IGPs do not deviate from their purpose, the entity claiming the exemption will need to demonstrate that there are reasons of technical efficiency for carrying on activities for third parties other than members, from which members might also benefit in the future.

78Checking both of these matters is the responsibility of the national court, which must apply the interpretative criteria I have described in reaching its conclusion as to whether or not an entity that provides services both to its own members and to third parties is entitled to the exemption.

79With those provisos, which are necessary in order to preserve the alignment of the aims of the exemptions with the aims of the directive, there is even less likelihood of distortions of competition and a greater likelihood of the aim of the exemptions being attained, that aim being to offset the competitive disadvantage suffered by IGPs by comparison with undertakings which procure services from their own employees or through a VAT group. ²⁶

IV. Conclusion

Conclusion

80In light of the foregoing considerations, I propose that the Court answer the question referred for a preliminary ruling by the Hof van Cassatie (Court of Cassation, Belgium) as follows:

Article 13A(1)(f) of Directive 77/388/EEC of 17 May 1977, now Article 132(1)(f) of Directive 2006/112/EC of 28 November 2006, must be interpreted as not permitting Member States to attach to the exemption laid down therein an exclusivity condition in accordance with which an independent group that also supplies services to persons who are not members is fully liable for VAT, even in respect of the services which it supplies to its members.

It is for the national court to ascertain whether the conditions for the application of the exemption laid down in that provision are satisfied. Where services are also supplied to persons who are not members, the national court must, so that the purpose of the exemption is not undermined, check that the services supplied to non-members are not quantitatively predominant by comparison with those supplied to members and that there are reasons of technical efficiency for the services supplied to non-members from which members might also benefit.

¹ Original language: Italian.

² OJ 1977 L 145, p. 1.

³ OJ 2006 L 347, p. 1.

⁴ It is apparent from the case file that Infohos was established as a public body on 21 February 1986 by the PCSWs of Aalst, Blankenberge, Bruges, Ghent, Kortrijk, Ostend and Ronse. Article 3 of the deed of establishment defines the object of the association as providing, analysing, organising and managing computer systems to support the management of the hospitals of its members, and associated activities carried on by its members.

⁵ Article 6 of the VAT Code provides that public establishments are deemed not to be taxable persons in so far as concerns the activities they carry on or the transactions they perform as public authorities, even if, in return for such activities and transactions, they charge fees of one kind or another.

⁶ ‘Independent groups of persons’ (IGPs) are associations of individuals or undertakings which independently supply goods or services to their own members.

⁷ See, to that effect, judgment of 11 December 2008, Stichting Centraal Begeleidingsorgaan voor de Intercollegiale Toetsing, C‑407/07, EU:C:2008:713, paragraph 27.

⁸ In so far as concerns the interpretation of this provision, see judgment of 21 September 2017, DNB Banka, C‑326/15, EU:C:2017:719, paragraph 29 and the case-law cited, according to which it is necessary, when interpreting a provision of EU law, to consider not only its wording but also the context in which it occurs and the objectives pursued by the rules of which it is part.

⁹ Again, with reference to the interpretation of the same provision, see, to that effect, judgment of 11 December 2008, Stichting Centraal Begeleidingsorgaan voor de Intercollegiale Toetsing, C‑407/07, EU:C:2008:713, paragraph 30 and the case-law cited. There, the Court states that, although a strict interpretation is necessary, that does not mean that the terms used to specify the exemptions should be construed in such a way as to deprive the exemptions of their intended effect or to make the exemptions more or less inapplicable.

¹⁰ Like that of Directive 2006/112, currently in force.

¹¹ Ninth recital of the Sixth Directive.

¹² See, on this point, judgments of 15 June 1989, Stichting Uitvoering Financiële Acties, 348/87, EU:C:1989:246, paragraph 11, and of 14 December 2006, VDP Dental Laboratory, C‑401/05, EU:C:2006:792, paragraph 26.

¹³ Judgments of 11 December 2008, Stichting Centraal Begeleidingsorgaan voor de Intercollegiale Toetsing, C‑407/07, EU:C:2008:713, paragraph 37, and of 21 September 2017, Commission v Germany, C‑616/15, EU:C:2017:721, paragraph 56.

¹⁴ Judgments of 21 September 2017, DNB Banka, C‑326/15, EU:C:2017:719, paragraph 33 and the case-law cited, and of 21 September 2017, Commission v Germany, C‑616/15, EU:C:2017:721, paragraphs 47 and 48 and the case-law cited concerning the aim of Article 132(1)(f) of Directive 2006/112.

¹⁵ As is apparent from the case file, the VAT Committee has expressed a view on this aspect, with reference to Article 132(1)(f) of Directive 2006/112. However, the Commission considers that that interpretation should also apply to Article 13A(1)(f) of the Sixth Directive, which was previously in force, given that the content of the two provisions is identical. See Article 398 of Directive 2006/112/EC and Working Paper No 654 of 3 March 2010, section 3.4(a).

¹⁶ Judgment of 23 November 2017, Di Maura, C‑246/16, EU:C:2017:887, paragraph 25, and, by analogy, judgment of 26 April 2012, Commission v Netherlands, C‑508/10, EU:C:2012:243, paragraph 75.

¹⁷ Judgment of 11 December 2008, Stichting Centraal Begeleidingsorgaan voor de Intercollegiale Toetsing, C‑407/07, EU:C:2008:713, paragraph 43.

¹⁸ Judgment of 11 December 2008, Stichting Centraal Begeleidingsorgaan voor de Intercollegiale Toetsing, C‑407/07, EU:C:2008:713, paragraph 27.

¹⁹ On this point, see judgments of 14 December 2006, VDP Dental Laboratory, C‑401/05, EU:C:2006:792, paragraph 26 and the case-law cited, and of 15 November 2012, Zimmermann, C‑174/11, EU:C:2012:716, paragraph 39 and the case-law cited.

²⁰ See, again, judgment of 11 December 2008, Stichting Centraal Begeleidingsorgaan voor de Intercollegiale Toetsing, C‑407/07, EU:C:2008:713, paragraph 30 and the case-law cited.

²¹ On this point, see Article 398 of Directive 2006/112/EC and Working Paper No 654 of 3 March 2010, section 3.4(a), which mentions potential impediments and practical difficulties for national authorities, albeit these are said not to differ from the practical difficulties which arise in numerous other situations in which it is necessary to examine activities which are subject to tax and activities which are tax-exempt. Moreover, the Commission has observed that this analysis of the situation has been taken up and developed in the working document accompanying the Green Paper on the future of VAT (SEC(2010) 1455 final of 1 December 2010) and in further works of the VAT Committee (Article 398 of Directive 2006/112/EC, Working Paper No 856 of 6 May 2015, section 3.1.10)

²² Judgment of 20 November 2003, Taksatorringen, C‑8/01, EU:C:2003:621, paragraph 64, and Opinion of Advocate General Kokott in Aviva, C‑605/15, EU:C:2017:150, point 68.

²³ Opinion of Advocate General Kokott in DNB Banka, C‑326/15, EU:C:2017:145, point 22.

²⁴ Judgment of 21 September 2017, Commission v Germany, C‑616/15, EU:C:2017:721, paragraph 65 and the case-law cited and paragraph 67.

²⁵ It is apparent from the case file that, on 1 July 2016, following a request for clarification put to the Belgian Government by the Commission, a new scheme of exemptions for IGPs came into force. In particular, the new Article 44(2a) of the VAT Code provides that, in the event that an IGP also supplies services to non-members, the services which it supplies to its own members will attract the exemption if those transactions account for the majority of the IGP’s activities.

²⁶ Opinion of Advocate General Kokott in Aviva, C‑605/15, EU:C:2017:150, point 67.