C-415/04 Stichting Kinderopvang Enschede

JUDGMENT OF THE COURT (Third Chamber)

9 February 2006 *

In Case C-415/04,

REFERENCE for a preliminary ruling under Article 234 EC from the Hoge Raad der Nederlanden (Netherlands), made by decision of 24 September 2004, received at the Court on the same day, in the proceedings

Staatssecretaris van Financiën

v

Stichting Kinderopvang Enschede,

THE COURT (Third Chamber),

composed of A. Rosas, President of the Chamber, J. Malenovský, A. La Pergola, A. Borg Barthet (Rapporteur) and A. Ó Caoimh, Judges,

* Language of the case: Dutch.

Advocate General: F.G. Jacobs, Registrar: R. Grass,

after considering the observations submitted on behalf of:

— the Stichting Kinderopvang Enschede, by W. Rouwenhorst, tax adviser,

— the Netherlands Government, by H.G. Sevenster and C. ten Dam, acting as Agents,

— the Commission of the European Communities, by D. Triantafyllou and A. Weimar, acting as Agents,

after hearing the Opinion of the Advocate General at the sitting on 15 September 2005,

gives the following

Judgment

Legal context and the dispute

1This request for a preliminary ruling concerns the interpretation of Article 13A (1)(g) to (i) 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 proceedings between the Stichting Kinderopvang Enschede ('the Foundation') and the Staatssecretaris van Financiën ('State Secretary for Finances') concerning reimbursement of value added tax ('VAT') which the Foundation paid over the period from 1 January to 31 March 1998.

Legal context

Community law

3Article 13A(1)(g) to (i) and 13A(2) of the Sixth Directive are worded as follows:

'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:

(g) the supply of services and of goods closely linked to welfare and social security work, including those supplied by old people's homes, by bodies governed by public law or by other organisations recognised as charitable by the Member State concerned;

(h) the supply of services and of goods closely linked to the protection of children and young persons by bodies governed by public law or by other organisations recognised as charitable by the Member State concerned;

(i) children's or young people's education, school or university education, vocational training or retraining, including the supply of services and of goods closely related thereto, provided by bodies governed by public law having such as their aim or by other organisations defined by the Member State concerned as having similar objects;

2. (a)...

(b) The supply of services or goods shall not be granted exemption as provided for in (1)(b), (g), (h), (i), (l), (m) and (n) above if:

— it is not essential to the transactions exempted, — its basic purpose is to obtain additional income for the organisation by carrying out transactions which are in direct competition with those of commercial enterprises liable for value added tax.'

National law

4Article 11(1)(f) of the 1968 Law on Turnover Tax (Wet op de omzetbelasting 1968) of 28 June 1968 (Staatsblad 1968, No 329), in the version applicable to the tax year at issue in the main proceedings ('the 1968 Law'), provides:

'Article 11

1. Subject to conditions to be laid down by public administrative regulation the following shall be exempt from tax:

f. supplies of goods and services of a social and cultural nature to be defined by public administrative regulation, provided that the operator does not seek to make a profit and that there is no serious distortion of conditions of competition in relation to operators who seek to make a profit'.

5Article 7(1) of the 1968 Regulation implementing the Law on Turnover Tax (Uitvoeringsbesluit omzetbelasting 1968) of 12 August 1968 (Staatsblad 1968, No 423), in the version applicable to the tax year at issue in the main proceedings ('the Implementing Regulation'), provides:

'The supply of goods and services set out in Annex B to this Implementing Regulation shall be treated as a supply of goods and services of a social and cultural nature within the meaning of Article 11(1)(f) of the [1968] Law.'

6 Item 6 of Annex B(b) to the Implementing Regulation refers in particular to:

'The supply of goods and services within the meaning of Article 7 of the Implementing Regulation made as such by the organisations listed hereinafter, provided that they do not seek to make a profit:

6Childcare organisations and schools for children with long-term illnesses'.

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

7The Foundation is a non-profit-making organisation which provides childcare, at a variety of locations, for children under school age and for children of school age outside school hours. It also maintains a list of host parents who, after screening by the Foundation, look after children in their own homes. Host parents may attend a training course paid for by the Foundation. For parents opting to have their child looked after by a host parent, the Foundation puts them in touch with the host parents on its list who are most appropriate for the parents' needs. The Foundation then acts as intermediary in the conclusion of a written agreement between the parents and the host parents. If, after a period of time, one of the parties wishes to discontinue the agreement or the terms of the agreement are breached, the parents of the child may again make use of the services of the Foundation. The Foundation does not accept any liability for damage arising from any breach of the agreement. Nor does it guarantee that the host parents will indeed be able to mind the child during the hours requested.

8For the services which it provided as intermediary, the Foundation charged parents, during the period at issue in the main proceedings, the sum of NLG 3.45 per child for each hour during which the services of a host parent were used. Parents also paid the host parents an hourly rate of NLG 5 per child.

9On the basis of that provision of services, the Foundation paid NLG 6 424 in respect of VAT for the period from 1 January to 31 March 1998 pursuant to a tax demand. The Foundation, however, lodged an objection with the Tax Inspectorate, seeking reimbursement of the tax paid on the basis of Article 11(1)(f) of the 1968 Law, Article 7(1) of the Implementing Regulation and item 6 of Annex B(b) thereto, arguing that the effect of those provisions was to exempt those services from VAT. The Tax Inspectorate dismissed that objection.

10The Foundation appealed against the Tax Inspectorate's decision to the Gerechtshof te Arnhem (Regional Court of Appeal in Arnhem). By its ruling of 9 April 2001 the Gerechtshof te Arnhem found in favour of the Foundation and set aside the decision of the Tax Inspectorate. The Staatssecretaris van Financiën then brought an appeal on a point of law against that ruling before the Hoge Raad der Nederlanden (Supreme Court of the Netherlands).

11In those circumstances, the Hoge Raad decided to stay proceedings and to refer the following question to the Court of Justice for a preliminary ruling:

'Must Article 13A(1)(g), (h) and (i) of the Sixth Directive be construed as meaning that the service provided as described [in the decision of the national court], consisting in intermediary activities in connection with the care of children under school age and of schoolchildren outside of school hours in the homes of host parents, falls to be regarded as a service covered by one or more of those provisions?'

The question referred for a preliminary ruling

12By its question the national court is essentially asking whether services as an intermediary between the parents of a child and the host parents looking after that child, such as those provided by the Foundation, are exempt from VAT as being services closely linked to welfare and social security work, the protection of children or young persons and/or children's or young people's education.

13As a preliminary point, it should be noted that, according to the case-law of the Court, the exemptions provided for 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 (see, in particular, Case C-498/03 Kingscrest Associates and Montecello [2005] ECR I-4427, paragraph 29, and Joined Cases C-394/04 and C-395/04 Ygeia [2005] ECR I-10373, paragraph 15). Those exemptions constitute independent concepts of Community law whose purpose is to avoid divergences in the application of the VAT system from one Member State to another (see, in particular, Case C-76/99 Commission v France [2001] ECR I-249, paragraph 21, and Ygeia, cited above, paragraph 15).

14Moreover, the purpose of Article 13A of the Sixth Directive is to exempt from VAT certain activities which are in the public interest. However, that provision grants exemption from VAT not for every activity performed in the public interest, but only for those which are listed therein and described in great detail (Case C-8/01 Taksatoningen [2003] ECR I-13711, paragraph 60, and Ygeia, paragraph 16).

15In order to be exempt under Article 13A(1)(g) to (i) of the Sixth Directive, the Foundation's intermediary services must be closely linked to one of the activities set out therein.

16It is therefore first of all necessary to establish whether the childcare provided by the host parents, to which the Foundation's services as intermediary are linked, can come within one of the activities referred to in Article 13A(1)(g) to (i) of the Sixth Directive, that is to say, respectively, welfare and social security work, the protection of children and young persons and children's or young people's education.

17It is common ground that the childcare provided by host parents can be regarded as the provision of a service falling within the scope of welfare and social security work and the protection of children and young persons within the meaning of Article 13A(1)(g) and (h) of the Sixth Directive.

18The Netherlands Government, however, is of the view that childcare is not a service falling within the sphere of children's or young people's education and hence, that Article 13A(1)(i) cannot be taken into account for the purpose of resolving a case such as that in the main proceedings.

19In this regard, it cannot be established with certainty from the information available to the Court whether education is provided as an integral part of the childcare provided by host parents. In the light of the findings made in paragraph 17 of this judgment, it is not necessary to rule on this point.

20Thus, the childcare provided by host parents is capable or being covered at the very least by the two categories of exemption provided for in Article 13A(1)(g) and (h) of the Sixth Directive.

21Secondly, the parties to the main proceedings agree that the Foundation is an organisation recognised by the Member State concerned within the meaning of Article 13A(1)(g) and (h) of the Sixth Directive. The Netherlands Government and the Commission of the European Communities consider that host parents must also satisfy this criterion. They take the view that the Foundation's services as intermediary can be covered by an exemption only where the service itself, to which the intermediary services are closely linked, also fulfils all the conditions required for exemption.

22The Netherlands Government refers with good reason in this regard to the wording of Article 13A(2)(b) of the Sixth Directive, which provides that 'the supply of services or goods shall not be granted exemption as provided for in (l)(b), (g), (h), (i), (1), (m) and (n) above if ... it is not essential to the transactions exempted'. It is apparent from these provisions that the main transaction, to which the supply of goods or services in question is closely linked, must itself also be an exempted transaction. In the case in the main proceedings, the exemption of the Foundation's services as intermediary between the parents of the child being cared for and the host parents thus presupposes that the childcare service provided by the latter is itself exempt from VAT.

23Given that host parents are independent persons who cannot be regarded as bodies governed by public law, the childcare services can be covered by the exemption under Article 13A(1)(g) or (h) of the Sixth Directive only to the extent that they are provided by 'organisations recognised as charitable by the Member State concerned'. The national authorities have a discretion in this regard which they must exercise in accordance with Community law (see, to that effect, Kingscrest Associates and Montecello, cited above, paragraphs 48 to 53). In this connection the Court has held inter alia that the expression 'other organisations recognised as charitable by the Member State concerned' in Article 13A(1)(g) of the Sixth Directive does not exclude from that exemption natural persons running a business, in that case a private entity seeking to make a profit (Kingscrest Associates and Montecello, paragraph 36). It is for the national court to determine whether the childcare services provided by host parents satisfy the conditions for exemption set out in those provisions, in particular the condition that the service provider must fulfil the criterion of 'charitable'.

24Thirdly, in order to be exempt from VAT under Article 13A(l)(g) to (i) of the Sixth Directive, the Foundation's services as intermediary must be closely linked to the childcare services. The Commission and the Netherlands Government deny that such a link exists, relying in particular on Case C-287/00 Commission v Germany [2002] ECR I-5811, in which exemption under Article 13A(l)(i) of the Sixth Directive for research activities carried out for consideration by public institutions of higher education was disallowed. The Court held, at paragraph 49 of that judgment, that the supply of such services was not closely related to university education, after having stated, at paragraph 48, inter alia that 'although the undertaking of such projects may be regarded as of great assistance to university education, it is not essential to attain its objective'.

25Whatever the interpretation given to the expression 'closely linked' under Article 13A(l)(g) and (h) of the Sixth Directive, Article 13A(2)(b) thereof in any event makes exemption conditional on the supply of goods or services concerned being essential to the transactions exempted (see, to that effect, Ygeia, paragraph 26). It follows that, in the case in the main proceedings, the Foundation's services as intermediary may be exempted only where it is established that they are essential to the childcare service.

26While the Foundation maintains in this regard that parents can only have access to the childcare service provided by host parents by using the Foundation's intermediary services, the Netherlands Government and the Commission contend that other channels are available for putting parents seeking childcare in touch with host parents, such as advertisements or commercial agencies.

27As the Advocate General has correctly noted at points 55 to 57 of his Opinion, the mere fact of keeping a list of all people known to offer childcare and making that list available to parents cannot be described as an essential service. Conversely, if the Foundation s screening of host parents' past records, and the fact of providing them with training, result in the selection only of host parents who are competent, trustworthy and such as to provide a higher quality of childcare than parents could otherwise have obtained without using the Foundation's services, these services could then be regarded as essential to the provision of quality childcare.

28It is for the national court to determine whether, in the light of the facts of the case before it, the childcare service used by parents on the basis of the Foundation's services as intermediary between parents and host parents is of such a nature or quality that it would be impossible to obtain a service of the same value without the assistance of an intermediary service such as that offered by the Foundation.

29The Netherlands Government also contends, in the alternative, that those services should be excluded from exemption under Article 13A(2)(b) of the Sixth Directive because their basic purpose is to obtain additional income for the Foundation by carrying out transactions which are in direct competition with those of commercial enterprises liable for VAT. However, since consideration of such an argument requires in essence an appraisal of questions of fact which fall outside the jurisdiction of the Court in the context of a reference for a preliminary ruling, it is for the national court to assess the substance thereof, taking account of all the specific facts of the case in the main proceedings.

30The answer to the question referred must therefore be that Article 13A(l)(g) and (h) of the Sixth Directive, read together with Article 13A(2)(b) thereof, must be interpreted as meaning that services as an intermediary between persons seeking, and persons offering, a childcare service, provided by a body governed by public law or an organisation recognised as charitable by the Member State concerned, may benefit from exemption under those provisions only where:

— the childcare service itself meets the conditions for exemption laid down in those provisions;

— that service is of such a nature or quality that parents could not be assured of obtaining a service of the same value without the assistance of an intermediary service such as that which is the subject-matter of the dispute in the main proceedings;

— the basic purpose of the intermediary services is not to obtain additional income for the service provider by carrying out transactions which are in direct competition with those of commercial enterprises liable for VAT.

Costs

31Since 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 (Third Chamber) hereby rules:

Article 13A(l)(g) and (h) 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, read together with Article 13A(2)(b) thereof, must be interpreted as meaning that services as an intermediary between persons seeking, and persons offering, a childcare service, provided by a body governed by public law or an organisation recognised as charitable by the Member State concerned, may benefit from exemption under those provisions only where:

— the childcare service itself meets the conditions for exemption laid down in those provisions;

— that service is of such a nature or quality that parents could not be assured of obtaining a service of the same value without the assistance of an intermediary service such as that which is the subject-matter of the dispute in the main proceedings;

— the basic purpose of the intermediary services is not to obtain additional income for the service provider by carrying out transactions which are in direct competition with those of commercial enterprises liable for value added tax.

[Signatures]

OPINION OF ADVOCATE GENERAL

JACOBS delivered on 15 September 2005 1

Introduction

1This reference for a preliminary ruling concerns an organisation which itself provides care for preschool children, and for school-age children outside school time, but which also puts parents in touch with independent day carers who provide the same service. In the latter case, it charges parents an hourly rate in addition to that which they pay to the carers, although it does not intervene further as between parents and carers, or accept any liability with regard to the service provided by the latter.

2In the national proceedings, it is disputed whether that hourly rate charged by the organisation to the parents should be subject to VAT. In that connection, the Netherlands Hoge Raad (Supreme Court) asks whether the organisation's services as intermediary between parents and carers are exempt from VAT as services closely linked to welfare

1 — Original language: English.

work, to the protection of children, or to children's education.

Relevant legislation

3Under Article 2(1) of the Sixth VAT Directive, 2 supplies of services effected for consideration by a taxable person acting as such are subject to VAT.

4A taxable person is defined in Article 4(1) and (2) as any person who independently carries out in any place any economic activity — that is to say all activities of producers, traders and persons supplying services, including mining and agricultural

2 — 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 1. 145. p. 1); hereinafter "the Sixth Directive'.

activities and activities of the professions — whatever the purpose or results of that activity.

5Under Article 11A(1), with certain exceptions and qualifications which are not relevant here, the taxable amount for a supply of services comprises the consideration obtained by the supplier from the customer.

security work, including those supplied by old people's homes, by bodies governed by public law or by other organisations recognised as charitable by the Member State concerned;

(h) the supply of services and of goods

6Article 13A of the Sixth Directive provides for exemption from VAT for certain activities in the public interest. Paragraph 1 of that provision reads as follows, in so far as is relevant:

closely linked to the protection of children and young persons by bodies governed by public law or by other organisations recognised as charitable by the Member State concerned;

'... Member States shall exempt the following (i) children's or young people's education, 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:

(g) the supply of services and of goods closely linked to welfare and social school or university education, vocational training or retraining, including the supply of services and of goods closely related thereto, provided by bodies governed by public law having such as their aim or by other organisations defined by the Member State concerned as having similar objects;

7Paragraph 2(b) provides, however:

'The supply of services or goods shall not be granted exemption as provided for in (1)(b), (g), (h), (i), (1), (m) and (n) above if:

— it is not essential to the transactions exempted,

— its basic purpose is to obtain additional income for the organisation by carrying out transactions which are in direct competition with those of commercial enterprises liable for value added tax.'

Facts and proceedings

8According to the order for reference, Stichting Kinderopvang Enschede ('the Foundation') is a non-profit making organisation. Its objectives are essentially to maintain and develop the provision of a range of childcare facilities responding to the childcare needs of working parents, and to act as intermediary between parents and independent carers.

9The Foundation itself runs a number of childcare centres for preschool children and for school-age children outside school time. It also maintains a list of independent 3 carers who look after children in their own homes. Carers are screened by the Foundation before inclusion on the list. Potential carers may attend a course paid for by the Foundation.

4

10In response to a request from a parent, the Foundation first explains the various forms of care which it proposes. If the parent decides to use an independent carer, a specialist from the Foundation discusses the parent's wishes. On the basis of that information, the Foundation introduces the most appropriate carer to the parent. If the contact is mutually satisfactory, a written

3 — Known as 'host parents'; I shall however refer to them as 'carers' in order to avoid any confusion between parents and host parents.

4 — Or an employer; apparently some employers use the Foundation's services to provide childcare for their employees. In what follows, 'parent' may be taken to include such employers. agreement is concluded between the carer and the parent, under which the parent pays an hourly rate for the care of each child. In 1998 that hourly rate was NLG 5. 5

11The Foundation does not accept any liability which might arise in connection with the agreement. Nor does it guarantee that independent care will in fact be provided during the hours requested; it undertakes only to endeavour to bring a parent into contact with an appropriate carer. A parent may however use the Foundation's own services if either party wishes to discontinue the agreement or if its terms are not observed.

12In 1998 the Foundation charged, for the services which it provided to parents, NLG 6 3.45 per child for each hour during which an independent carer was used. None of that amount was passed on to the carer.

5 — Approximately EUR 2.27; it appears from the Foundation's website that the rate in 2005 is EUR 2.50 or 3.30 per hour, depending on the number of children.

6 — Approximately EUR 1.57; the rate in 2005 is EUR 2.89, including VAT. The total per hour is thus EUR 5.39 or 6.19. The hourly charge for childcare provided by the Foundation itself in 2005 varies in normal cases from EUR 5.34 to 6.07.

13In regard to that provision of services, 7 the Foundation was assessed for NLG 6 424 in VAT for the period January to March 1998. It appealed against the assessment, arguing that the services in question were exempt by virtue of the Netherlands legislation implementing Article 13A(1)(g) and (h) of the Sixth Directive.

14The regional appeal court found that the Foundation operated in the area of childcare, and that its activities as intermediary with regard to independent carers could not easily be regarded as 'other than serving exclusively the purposes of the childcare' 8 even though they did not constitute direct involvement in that care. Consequently, those activities came within the scope of the exemption in issue.

15The tax authorities have now appealed on a point of law to the Hoge Raad, arguing that when acting as intermediary the Foundation provides a separate commercial service bringing together supply and demand in a specific area. That service does not amount to provision of childcare and is not provided in the Foundation's capacity as an 'establishment for the provision of childcare as such' within the terms of the Netherlands legisla-

7 — Approximately EUR 2 920.

8 — '... niet uitsluitend aan de kinderopvang dienstbaar', in the words of the Hoge Raad.

tion implementing the exemption in issue. Nor is the service so closely linked to the childcare provided by the Foundation itself that it can be regarded as provided by an establishment engaged in the provision of childcare as such.

16The Hoge Raad considers that the appeal raises the question whether the service in issue falls within the exemption in Article 13A(l)(g), or possibly (h) or (i), of the Sixth Directive. It has therefore referred the following question for a preliminary ruling:

'Must Article 13A(l)(g), (h) and (i) of the Sixth Directive be construed as meaning that the service provided as described above, consisting in intermediary activities in connection with the care of children under school age and of schoolchildren outside of school hours in the homes of host parents, falls to be regarded as a service covered by one or more of those provisions?'

17The Hoge Raad specifies further that it is common ground that the Foundation's own childcare services are exempt and that, in that respect, the Foundation is to be regarded as a recognised organisation for the purposes of the relevant provisions of the Sixth Directive; under Netherlands legislation, it is a recognised organisation for the provision of childcare, with regard both to actual childcare and to the services in issue.

18Written observations have been submitted by the Foundation, the Netherlands Government and the Commission. No hearing has been requested and none has been held.

Assessment

Preliminary remarks

19The Hoge Raad's question concerns the classification of the service provided by the Foundation when it acts as intermediary between parents and independent carers.

20The dispute between the Foundation and the tax authorities concerns the levying of VAT on the sums charged to parents by the Foundation in respect of each hour a child is looked after by an independent carer.

21It is clear from Articles 2(1) and 11A(1) of the Sixth Directive that, when a service is taxable, what is taxed is the consideration for the service. Consequently, a provision of services is taxable only if there is a direct link between the service provided and the consideration received. 9

22The existence of a direct link between the Foundation's services as intermediary and the amounts which it receives in respect of each hour of independent childcare is not questioned in the order for reference; it does not appear to be in issue before the Hoge Raad. Nor have any observations been submitted to the Court in that regard.

23In those circumstances, I shall confine my analysis to the question actually posed by the Hoge Raad.

24I merely note, none the less, that certain features of the arrangements as they have been presented might suggest that there is no substantial link between the service and the consideration in issue. For example: the payment is made not at the time of the initial service but on repeated occasions over a subsequent period; it may vary considerably both in duration and in total amount, but the variation is not determined by any feature of the initial service; the amount is relatively high and appears to be calculated so as to ensure that the hourly cost to parents is the same whether care is provided by the Foundation itself or by an independent carer; and the Foundation does not accept liability in respect of the independent care provided, on the basis of which the payment is calculated.

The question posed

Scope

25The question is whether the Foundation's services as intermediary, as described in the order for reference, are exempted under Article 13A(1)(g), (h) or (i).

26For that to be the case, they must be 10 closely linked (or related ) to an activity defined in one of those subparagraphs.

10 — The use of the word 'related' in subparagraph (i), where subparagraphs (g) and (h) use 'linked', appears to be a quirk 9 — See also Case 102/86 Apple and Pear Development Council of the English version; other language versions use the same [1988] ECR 1443, paragraphs 11 and 12, Case C-16/93 Tolsma term in the three provisions, and there is no reason to [1994] ECR 1-743, paragraph 13, and Case C-174/00 Kennemer Golf [2002] ECR I-3293, paragraph 39.

suppose that any difference in meaning was intended.

27The Foundations services as intermediary are specified by the Hoge Raad to be 'in connection with the care of children ... in the homes of host parents'.

28They thus cannot be linked to the childcare which the Foundation provides itself — with regard to which it cannot be said to act as 'intermediary' and in respect of which it does not charge the hourly payment in issue — but only to that provided by independent carers.

29I agree with the Netherlands Government that there are no grounds for supposing that such childcare can fall within the category of education in Article 13A(1)(i) of the Sixth Directive. It is of course possible to combine childcare with an element of education, whatever the age of the child, and it may be the case that certain independent carers do in fact feel that they have an educational role to play, but it is not suggested that education is envisaged as an inherent part of the childcare in issue here.

30However, childcare does in principle seem capable of falling within the scope of 'welfare and social security work' and/or 'protection of children and young persons' within the meaning of Article 13A(1)(g) and (h) respectively, and no suggestion to the contrary has been made. Since the conditions for the application of each of those exemptions are identical, it is unnecessary to decide between the two.

31It is accepted that the Foundation is an organisation recognised as charitable by the Member State concerned, within the meaning of Article 13A(1)(g) and (h).

32The Foundation stresses moreover that it is only through its activities as intermediary that parents have access to the services of the independent carers on its list and in particular, thanks to its screening and advice, to those of the most appropriate carer. Its service must be regarded as a prerequisite for the provision of the childcare, and thus as ancillary thereto.

33However, the Netherlands Government and the Commission submit both that the Foundation's services as intermediary do not qualify as 'closely linked' to the childcare provided by independent carers, and that that childcare cannot serve as a basis for exempting linked supplies since it is not itself an exempt service.

34The Netherlands Government further submits, in the alternative, that exemption is precluded by Article 13A(2)(b) because, on the one hand, the service is not essential to the provision of the childcare in question and, on the other, it is intended to obtain additional income for the Foundation by providing a service in competition with commercial services subject to VAT.

35It thus seems to me that, although the Foundation's intermediary services may clearly be linked, at least in a broad sense, to the independent childcare services, there are a number of possible obstacles to exemption. In that regard, the following questions are relevant:

(i) Are the intermediary services 'closely linked' to the childcare services?

(ii) Can exemption be founded on a link to the childcare services if they are not themselves exempt?

(iii) Are the intermediary services essential for the childcare services?

(iv) Is the basic purpose to obtain additional income, and is there competition with commercial services subject to VAT?

36If the answer to any of the first three questions is no, or to the fourth question yes, then there can be no exemption for the services described. All of those questions involve factual assessments but, at least with regard to the first three, there are also matters of interpretation which may be clarified by this Court.

37Finally, it may be pointed out that the effects of exemption from VAT can vary according to circumstances. When a particular transaction is exempt, the supplier cannot deduct any input tax incurred on goods or services which he acquired for the purpose of the transaction; nor can the customer deduct any of that tax which will remain, latent and invisible, in the cost of the transaction. The Foundation may be presumed to have considered its situation when seeking exemption for the disputed service, but it is difficult to predict that exemption will always be advantageous for others who may provide a comparable service. A balanced and neutral approach to the interpretation of the relevant provisions is therefore appropriate.

(i) Are the intermediary services 'closely linked' to the childcare services?

38The list of exemptions in Article 13A(1) makes extensive reference to supplies which are in some way connected with activities in the public interest.

39In addition to subparagraphs (g), (h) and (i), subparagraphs (b), (1), (m) and (n) specify a criterion of 'close' connection. The terminology used is not always identical, and the variations differ from one language version to another, but it seems to me that the same concept must be intended in each case.

40By contrast, some other subparagraphs specify a looser connection, using terms such as 'incidental', 'with a view to' or 'in connection with' (subparagraphs (a), (k) and (o) respectively; again there is variation as between language versions).

41In that light, I do not consider the 11 Court's judgment in Dudda, from which the Foundation seeks to draw an analogy, to be of assistance. Not only did it relate to determination of the place of supply, rather than the existence of an exemption, but it was specifically concerned with the supply of services defined as 'relating' or 'ancillary' to certain cultural or similar activities, under Article 9(2)(c) of the Sixth Directive. The degree of connection in issue there is clearly of the looser rather than the closer kind.

42The Commission and the Netherlands Government refer to Commission v Ger 1 many, 2 in which the Court took the view that research projects undertaken by State universities for remuneration are not closely related to university education within the meaning of Article 13A(1)(i) because, first, the exemption is designed to ensure that access to education is not hindered by the increased costs that would follow if closely related goods or services were subject to

11 - Case C-327 « [19%] LCR I-4595 12 - Case C-287 00 [2002] ECR I-5811, in at paragraph 45 et scq ; see also Cast· C-76 W Commission v France [2001 ] [CR I-249 VAT (and there would be no such hindrance as a result of taxing remunerated research projects) and, second, although such projects may be of assistance to university education, they are not essential to attain the objective of teaching students to enable them to pursue a professional activity.

43As regards the first aspect, it seems arguable that taxing a single charge in respect of the service of introducing a parent to a carer would not hinder access to childcare. Where the charge for the service represents a significant proportion of the payment for each hour of childcare for as long as that care is provided, that may not be true. In that regard, however, the question of the link between the service and the payment 1 is again raised. 3

44As regards the second aspect, I would hesitate to agree that the existence of a close link between a supply and an activity necessarily implies that the supply must be

13 — See my remarks at point 24 above.

essential in order to attain the objectives of the activity.

45However, since all the provisions of Article 13A(1) which apply the criterion of a close link are also subject to the condition in the first indent of Article 13A(2)(b) that the supply must be essential to the exempted transactions, the point is immaterial in the present context. I shall deal with it below, under (iii).

(ii) Can exemption be founded on a link to the childcare services if they are not themselves exempt?

46The Commission and the Netherlands Government suggest that, even if there is a close link between the Foundation's services as intermediary and the childcare provided by independent carers, it is necessary for that childcare itself to qualify for exemption under Article 13A(1)(g) and (h) in order for the linked service to qualify also. In other words, the childcare must in particular be provided by 'bodies governed by public law or by other organisations recognised as charitable'.

47The provisions of Article 13A(1)(b), (g), (h), (i), (1), (m) and (n) have in common that they all use the concept of a close connection between a supply and an activity in the public interest, the supply in question being made by an entity of a public, charitable, cultural, associative, non-profit making or other similar nature, and are all subject to the provisos in Article 13A(2)(b).

48They vary however in the way in which the connection is expressed: 'hospital and medical care and closely related activities' ((b)); 'the supply of services and of goods closely linked to' welfare, child protection and similar activities ((g) and (h)); education 'including the supply of services and of goods closely related thereto' ((i)); services 'and goods closely linked thereto' for the benefit of members of certain organisations ((1)); 'certain services closely linked to sport or physical education' ((m)); certain cultural services 'and goods closely linked thereto' ((n)).

49On a literal reading, one might argue that (b), (i), (1) and (n) exempt a particular activity in the public interest together with other supplies closely linked to that exempt activity; whereas (g), (h) and (m) exempt certain supplies closely linked to a particular activity, whether that activity is itself exempt or not.

50The latter limb of that argument does not however seem viable. It appears inconsistent, as the Commission submits, with the logic of the provisions and, as the Netherlands Government points out, with the wording of the first indent of Article 13A (2)(b), which stipulates that the supplies in question must be 'essential to the transactions exempted'.

51It seems therefore that, in order for the closely related supplies to be exempt, the principal activity must also be exempt and must thus satisfy all the conditions for exemption — including the requirement that it is performed by a body governed by public law or other organisation recognised as 1 charitable. 4

14 - Sec also Case C-498/03 Kingscrest [2005] ECR I-4427, at paragraph 30.

52Accordingly, where the Foundation acts only as an intermediary, for its services in that capacity to be exempted under Article 13A(1)(g) or (h), the independent childcare to which they are linked must also satisfy the conditions for exemption under those provisions.

53Clearly the independent carers are not bodies governed by public law. It is not for this Court to determine whether they are recognised as charitable organisations. Recognition is a matter for the national authorities, who enjoy a degree of discretion, to be exercised in accordance with Commu 15 nity law and subject to judicial review. With regard to the possibility of recognising independent carers, reference may be made to the Court's judgments in Bulthuis-16 17 Griffioen and Gregg, from which it would appear that natural persons may qualify for such recognition only if they are 'running a business'.

15 — See Kingscrest, in particular at paragraph 48 et seq. 16 — Case C-453/93 [1995] ECR I-2341.

17 — Case C-216/97 [1999] ECR I-4947, especially at paragraphs 14 to 19.

(iii) Are the intermediary services essential for the childcare services?

54It seems difficult to suppose that a parent can use childcare services without first being put in touch with the carer. The Foundation stresses that the childcare services in question are accessed only through its activities as intermediary. The Netherlands Government, however, argues that other channels are also available, including advertisements or commercial agencies.

55It seems to me that if the Foundation were to do no more than keep a list of all people known to offer childcare and to make that list available to parents, the service could in no way be described as essential. There are many other ways in which parents can enter into contact with would-be carers.

56However, if the Foundation's screening and training activities are such that its services as intermediary provide access to only such competent and trustworthy carers as parents would otherwise have been unable to identify, then the latter services may be viewed as essential in order to gain access to childcare of that quality, even if the Foundation does not accept responsibility for any shortcomings in the childcare actually provided.

57I am thus of the view that the relevant factual assessment is whether the care to which access is provided is of such a kind or quality as parents could not be assured of without the Foundation's services as intermediary.

Conclusion

(iv) Is the basic purpose to obtain additional income, and is there competition with commercial services subject to VAT?

58This is again a factual question which cannot be determined by this Court, and no particular problem of interpretation has been raised with regard to it in the present case. There is no confirmation in the case-file that commercial agencies do in fact provide a similar service to that of the Foundation, although the Netherlands Government asserts that to be the case. If it is necessary to assess the purpose of the service offered, it might be appropriate to take into account, on the one hand, the Foundation's non-profit making status and, on the other hand, the amount and mode of calculation of the disputed charge.

59In the light of the above considerations, I am of the opinion that the Court should give the following answer to the Hoge Raad:

Where a body governed by public law or an organisation recognised as charitable by the Member State concerned acts as intermediary between persons seeking and persons offering childcare services, its service as intermediary may be exempted from VAT under Article 13A(1)(g) or (h) 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 only if:

— subjection to VAT would hinder access to the childcare services by increasing their cost;

— the childcare services themselves qualify for exemption under the same provision(s);

— the childcare services are of a kind or quality of which those seeking those services could not be assured if they did not use the intermediary services; and

— the basic purpose of the intermediary services is not to obtain additional income by carrying out transactions which are in direct competition with those of commercial enterprises liable for VAT.