C-45/01 Dornier

JUDGMENT OF THE COURT (Fifth Chamber)

6 November 2003 *

In Case C-45/01,

REFERENCE to the Court under Article 234 EC by the Bundesfinanzhof (Germany) for a preliminary ruling in the proceedings pending before that court between

Christoph-Dornier-Stiftung für Klinische Psychologie

and

Finanzamt Gießen,

on the interpretation of Article 13A(1)(b) and (c) 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),

* Language of the case: German.

THE COURT (Fifth Chamber),

composed of: D.A.O. Edward, acting as President of the Fifth Chamber, P. Jann and of A. Rosas (Rapporteur), Judges,

Advocate General: C. Stix-Hackl, Registrar: H. von Holstein, Deputy Registrar,

after considering the written observations submitted on behalf of:

— Christoph-Dornier-Stiftung für Klinische Psychologie, by W. Küntzel, Rechtsanwalt,

— the German Government, by W.-D. Plessing and B. Muttelsee-Schön, acting as Agents,

— the Danish Government, by J. Molde, acting as Agent,

— the Commission of the European Communities, by E. Traversa and K. Gross, acting as Agents, assisted by A. Böhlke, Rechtsanwalt, having regard to the Report for the Hearing,

after hearing the oral observations of Christoph-Dornier-Stiftung für Klinische Psychologie, of the German Government and of the Commission at the hearing on 18 September 2002,

after hearing the Opinion of the Advocate General at the sitting on 10 December 2002,

gives the following

Judgment

Legal context and the dispute

1By order of 14 December 2000, received at the Court on 2 February 2001, the Bundesfinanzhof (Federal Finance Court) referred to the Court for a preliminary ruling under Article 234 EC four questions on the interpretation of Article 13A(1)(b) and (c) 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 questions were raised in proceedings between Christoph-Dornier-Stiftung für Klinische Psychologie ('Dornier') and the Finanzamt (Tax Office) Gießen ('the Finanzamt') concerning the charging of value added tax ('VAT') at a reduced rate on psychotherapeutic treatment provided by Dornier in 1990 when, according to Dornier, those services should have been exempt from VAT.

Legal framework

Community legislation

3Under Article 2(1) of the Sixth Directive, VAT is chargeable on 'the supply of goods or services effected for consideration within the territory of the country by a taxable person acting as such'.

4Article 4(1) and (2) of the Sixth Directive provides:

'1. "Taxable person" shall mean any person who independently carries out in any place any economic activity specified in paragraph 2, whatever the purpose or results of that activity.

2. The economic activities referred to in paragraph 1 shall comprise all activities of producers, traders and persons supplying services including mining and agricultural activities and activities of the professions. The exploitation of tangible or intangible property for the purpose of obtaining income therefrom on a continuing basis shall also be considered an economic activity.'

5Article 13A(1)(b), (c) and (g) of the Sixth Directive states:

'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:

(b) hospital and medical care and closely related activities undertaken by bodies governed by public law or, under social conditions comparable to those applicable to bodies governed by public law, by hospitals, centres for medical treatment or diagnosis and other duly recognised establishments of a similar nature;

(c) the provision of medical care in the exercise of the medical and paramedical professions as defined by the Member State concerned;

(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'.

6Article 13A(2) of the Sixth Directive provides:

'(a) Member States may make the granting to bodies other than those governed by public law of each exemption provided for in (1)(b), (g), (h), (i), (1), (m) and (n) of this Article subject in each individual case to one or more of the following conditions:

— they shall not systematically aim to make a profit, but any profits nevertheless arising shall not be distributed, but shall be assigned to the continuance or improvement of the services supplied,

— they shall be managed and administered on an essentially voluntary basis by persons who have no direct or indirect interest, either themselves or through intermediaries, in the results of the activities concerned,

— they shall charge prices approved by the public authorities or which do not exceed such approved prices or, in respect of those services not subject to approval, prices lower than those charged for similar services by commercial enterprises subject to value added tax, — exemption of the services concerned shall not be likely to create distortions of competition such as to place at a disadvantage commercial enterprises liable to value added tax.

(b) 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.'

National legislation

7Paragraph 4(14) and (16) of the Umsatzsteuergesetz 1980 (Law on Turnover Tax; 'the UStG'), in the version in force at the date of the facts in the main proceedings, provides:

'The following transactions covered by Paragraph 1(1)(1) to 1(1)(3) are exempt: 14. activities arising from the practice of the profession of doctor, dentist, lay practitioner (heilpraktiker), physiotherapist, midwife or similar professional medical activity for the purposes of Paragraph 18(1)(1) of the Einkommensteuergesetz [Law on Income Tax] or from the practice of the profession of clinical chemist. Other supplies by associations whose members belong to the professions set out in the first sentence are also exempt vis-à-vis their members in so far as those supplies are directly used to carry out activities exempt under the first sentence.

16. activities closely linked with the operation of hospitals, diagnostic clinics and other bodies providing medical care, diagnoses or tests and of old people's homes, residential accommodation for the elderly and nursing homes, where:

(a) those bodies are run by legal persons governed by public law or

(c) in the case of diagnostic clinics and other establishments providing treatment by doctors, diagnoses or tests, the services are provided under the supervision of a doctor and in the previous calendar year at least 40% of the services were provided to the persons specified in number (15)(b)...'.

8Paragraph 4(15)(b) of the UStG specifies the following persons:

'insured persons, persons in receipt of social assistance or... persons entitled to maintenance or a pension.'

9According to a judgment of 10 November 1999 of the Bundesverfassungsgericht (Federal Constitutional Court), Article 3(1) of the Grundgesetz (Basic Law) precludes the question whether medical activities are exempt from turnover tax from being decided solely on the basis of legal form. Accordingly, exemption from tax of the activities of a member of one of the professions listed in the first sentence of Paragraph 4(14) of the UStG is not limited to the person who actually practises the profession but can also be claimed by a partnership or a company.

Main proceedings and questions referred for a preliminary ruling

10Dornier is a charitable foundation governed by private law, with its head office at Marburg (Germany). According to the order for reference, its object is to develop the practice of clinical psychology. It also aims to improve methods of treatment through theoretical and practical research in clinical psychology. For those purposes, it maintains an out-patient facility in which patients are given psychotherapeutic treatment by qualified psychologists employed by the foundation.

11In 1990, the qualified psychologists employed by the foundation were not doctors. However, they were licensed to practise under the Heilpraktikergesetz (Law on Lay Practitioners) and had received further education to qualify as psychotherapists.

12More than 40% of the services Dornier provided in 1990 were for persons insured under the compulsory social insurance scheme, for persons in receipt of social assistance or for persons entitled to maintenance or a pension. In addition, the board members and principal employees were psychotherapists who were licensed as lay practitioners ('Heilpraktiker').

13In 1990, the Finanzamt taxed the services supplied by Dornier at a reduced rate of VAT under Paragraph 12(2)(8) of the UStG. Disagreeing with Dornier, it took the view that those services were not exempt from tax under Paragraph 4(16)(c) of the UStG.

14Dornier contested its tax assessment for 1990 before the Hessisches Finanzgericht (Finance Court, Hesse), Kassel (Germany). It argued that, if applied in accordance with the German Constitution and Community directives, the exemption in question covered not only 'services provided under the supervision of a doctor' but also those services provided by establishments offering psychotherapeutic care where they were managed not by doctors but by qualified psychologists holding a further paramedical qualification similar to that of a medical specialist in psychotherapy and licensed as lay practitioners. The refusal of tax exemption gave rise to a difference in treatment, without any objective reason, as compared with the taxation of comparable services provided under the supervision of a doctor.

15The Hessisches Finanzgericht took the view that neither Article 13A(1)(b) of the Sixth Directive nor constitutional considerations required that Paragraph 4(16)(c) of the UStG be applied more broadly than its wording entailed. It accordingly rejected the claim, on the ground that Dornier had not provided the services specified in Paragraph 4(16)(c) of the UStG under the supervision of doctors.

16Dornier appealed against this judgment to the Bundesfinanzhof. The latter stayed the proceedings and referred the following four questions to the Court for a preliminary ruling:

'1. Does psychotherapeutic treatment, given in an out-patient facility provided by a foundation (charitable establishment) employing qualified psychologists who are licensed under the Heilpraktikergesetz but who are not registered as doctors, qualify as activities "closely related" to hospital and medical care within the meaning of Article 13A(1)(b) of Directive 77/388/EEC?

2. In order for there to be an "other duly recognised establishment of a similar nature" within the meaning of Article 13A(1)(b) of Directive 77/388/EEC, must there be a formal recognition procedure or can recognition also derive from other rules (e.g. rules concerning the assumption of costs by social security authorities) which apply equally to hospitals, centres for medical treatment and other establishments?

Is an exemption from tax unavailable to the extent that the social security authorities do not reimburse, or only partially reimburse, patients for the costs of psychotherapeutic treatment given by the aforementioned employees of the claimant?

3. Is the psychotherapeutic treatment provided by the claimant exempt from tax on the basis of the neutrality of value added tax, because the psychotherapists it employs could have provided the same treatment on a tax-exempt basis under Article 13A(1)(c) of Directive 77/388/EEC if they had provided it themselves as self-employed taxable persons?

4. Is the claimant entitled to rely on the tax exemption of its transactions involving psychotherapeutic treatment under Article 13A(1)(b) and (c) of Directive 77/388/EEC?'

Questions referred for a preliminary ruling

17The Court finds, as a preliminary point, that the third question referred, concerning the interpretation of Article 13A(1)(c) of the Sixth Directive, is substantively identical to a question on which the Court has already ruled. The answer to that question is pertinent to the examination of the first question, which concerns the interpretation of letter (b) of the same provision. Accordingly, it is appropriate to examine the third question first.

The third question

18By its third question, the national court asks the Court whether the psychotherapeutic treatment provided by Dornier may be exempted from VAT under Article 13A(1)(c) of the Sixth Directive, having regard, first, to the principle of neutrality inherent in the common system of VAT and, second, to the fact that the same treatment could have been provided on a tax-exempt basis by psychotherapists employed by Dornier if they had provided it not as employees but as self-employed taxable persons.

19It is apparent from both the wording of the question and the observations submitted to the Court in this connection that it is common ground that if the psychotherapeutic treatment had been provided by self-employed psychotherapists, it would have been exempt from tax as provided for in Article 13A(1)(c) of the Sixth Directive. Accordingly, the third question essentially asks whether the legal form of the taxable person who provided the service in question, in this case a foundation governed by private law, prevents that exemption from applying.

20The Court has held that the exemption envisaged in Article 13A(1)(c) of the Sixth Directive is not dependent on the legal form of the taxable person supplying the medical or paramedical services referred to in that provision (Case C-141/00 Kügler [2002] ECR I-6833).

21The answer to the third question must therefore be that since the exemption envisaged in Article 13A(1)(c) of the Sixth Directive is not dependent on the legal form of the taxable person providing the medical or paramedical services referred to in that provision, psychotherapeutic treatment provided by a foundation governed by private law and given by psychotherapists employed by the foundation may benefit from that exemption.

The first question

22By its first question, the national court essentially asks whether the exemption from VAT provided for in Article 13A(1)(b) of the Sixth Directive applies to psychotherapeutic treatment given in the out-patient facility of a foundation governed by private law by qualified psychologists employed by the foundation who are licensed to carry out such treatment but are not doctors.

23It follows from the answer to the third question that psychotherapeutic treatment given in conditions such as those indicated in the main proceedings may benefit from the exemption provided for in Article 13A(1)(c) of the Sixth Directive. Since, according to the information given in the order for reference, the treatment at issue in the main proceedings appears to have been given to the patients in the out-patient facility of a foundation governed by private law, it is not necessary to examine whether the same treatment also fulfils the conditions for benefiting from a tax exemption pursuant to Article 13A(1)(b).

24The possibility cannot be totally excluded, however, that an interpretation of the terms used in Article 13A(1)(b) may be relevant for resolving the dispute pending before the national court. Accordingly, it is appropriate to rule on the interpretation of Article 13A(1)(b) of the Sixth Directive.

25In accordance with the wording of its first question, the national court wishes to know whether such treatment is an activity 'closely related' to hospital and medical care.

26In asking the Court whether psychotherapeutic treatment given in conditions such as those referred to above is an activity closely related to hospital and medical care within the meaning of Article 13A(1)(b) of the Sixth Directive, the national court appears not to envisage the possibility that such treatment may be 'medical care' within the meaning of that provision. Dornier and the Commission submit, however, that 'medical care' should be given a broad interpretation, which could thus apply to psychotherapeutic treatment given by persons who are not doctors. In those circumstances, in order to give an appropriate answer to the first question, the course followed by the Advocate General in her Opinion must be adopted and consideration given not only to the term 'activities closely related to hospital and medical care', but also to the term 'medical care', both of which are found in Article 13A(1)(b) of the Sixth Directive.

27It must be acknowledged that, even if psychotherapeutic treatment is not an activity closely related to hospital care or care by doctors, it may nevertheless be covered by the term 'medical care' within the meaning of the abovementioned provision, as Dornier and the Commission suggest.

Activities 'closely related' to hospital and medical care

— Observations submitted to the Court

28The German Government submits that the psychotherapeutic treatment at issue in the main proceedings does not come within the ambit of activities 'closely related' to hospital or medical care within the meaning of Article 13A(1)(b) of the Sixth Directive. In its view, there must be a link between such activities and hospital or medical care and they must therefore either supplement or be a necessary precondition of that care. It states that Dornier's activity is complete in itself and that such treatment is not linked to other types of care.

29The Danish Government submits that the tax exemption under Article 13A(1)(b) of the Sixth Directive should apply only where the treatment, viewed in isolation, must be regarded as hospital or medical care in the strict sense or where it is sufficiently closely related to the hospital or medical care.

30According to the Danish Government, in the absence of a sufficiently direct link between the treatment given by a paramedical profession and medical care in the strict sense, there is a risk of the exemption provided for in Article 13A(1)(b) of the Sixth Directive extending to treatment covered by letter (c) of the same provision. It is for the Member States to choose which paramedical treatment to exempt, pursuant to the power granted by Article 13A(l)(c); this cannot be called into question by an interpretation of letter (b) of the same provision.

31The Danish Government submits, in the event that the Court should find that Article 13A(1)(b) of the Sixth Directive is to be interpreted as meaning that the exemption provided for therein may also extend to treatment which could be exempted by the Member States under letter (c) of the same provision, that it is necessary to determine precisely the extent of such an overlap.

32The Commission considers that psychotherapeutic treatment is not an activity 'closely related' to hospital or medical care within the meaning of Article 13A(1)(b) of the Sixth Directive. In paragraph 27 of Case C-76/99 Commission v France [2001] ECR I-249, the Court considered the term to equate to the relationship between an ancillary service and a principal service. According to the Commission, the services provided by psychotherapists are independent services which are not a means of better enjoying the principal service (Case C-349/96 CPP [1999] ECR I-973, paragraph 30). Such treatment is linked to medical services only in so far as reimbursement of the related expenditure by health insurance schemes or social security authorities is subject to prior certification by a doctor of the need for the treatment. The Commission points out, however, that the Bundesfinanzhof has stated that no doctor is involved in the treatment in the strict sense.

— Findings of the Court

33As stated by the Court in paragraph 22 of Commission v France, cited above, Article 13A(1)(b) of the Sixth Directive does not include any definition of the concept of activities 'closely related' to hospital and medical care. None the less, it is apparent from the very terms of that provision that it does not envisage services which are unrelated to hospital care for the patients receiving those services or to any medical care which they might receive.

34In this case, it is common ground that the psychotherapeutic treatment given in Dornier's out-patient facility by qualified psychologists generally constitutes services provided to the patients as an end in themselves and not as a means of better enjoying other types of services. In so far as that treatment is not ancillary to hospital or medical care, it is not an activity 'closely related' to services exempted under Article 13A(1)(b) of the Sixth Directive.

35Accordingly, the Court finds that psychotherapeutic treatment given in an out-patient facility of a foundation governed by private law by qualified psychologists who are not doctors is an activity 'closely related' to hospital or medical care within the meaning of Article 13A(1)(b) of the Sixth Directive only when such treatment is actually given as a service ancillary to the hospital or medical care received by the patients in question and constituting the principal service.

The term of 'medical care'

— Observations submitted to the Court

36Dornier submits that the psychotherapeutic treatment which is given in its out-patient facility by qualified psychologists is 'medical care' within the meaning of Article 13A(1)(b) of the Sixth Directive. It states that the care given by psychotherapists consists in diagnosing, treating and curing psychological illnesses or disorders. It is therefore medical care concerning the health of persons within the meaning of Case C-384/98 D. [2000] ECR I-6795, paragraphs 17 and 18.

37Dornier submits that, according to the definition of 'medical care' given by the Court, it is necessary to ascertain and define the material content of the service provided, that is, the durable capacity to provide medical care and not the formal admission of the person providing the care as a doctor or as a person treated as a doctor from the point of view of professional regulations. It states that psychotherapists were not treated as doctors because of lacunae which still existed in 1990 in the applicable professional regulations.

38According to Dornier, the conditions governing the application of the VAT exemption in Article 13A(1)(b) of the Sixth Directive do not require that the care be given by a specific group of persons, that is, persons authorised to practise medicine in accordance with the Federal Medical Regulations. It submits that, were that the case, it would have been necessary to choose a formulation such as 'medical care given by doctors'. An examination of various language versions of the Sixth Directive confirms that the term 'medical care' refers to a substantive concept linked to an activity. Dornier infers from this that it cannot be a criterion for application of the exemption that the activity be carried out by a doctor, or even under the supervision of a doctor. On the contrary, for the exemption to apply, it must be sufficient for care to be given by a member of a medical profession who is authorised to practise and whose qualification is comparable to a doctor's, as is that of the qualified psychologists in question in the main proceedings.

39The Commission also submits that the term 'medical care' must be understood in the broad sense and that it is not limited to medical activities in the strict sense. According to the Commission, Article 13A(1)(b) and (c) both concern 'medical care concerning the health of persons' in accordance with the definition given by the Court in paragraphs 17 and 18 of D., cited above. The care referred to in letters (b) and (c) differs less in its nature than in the form in which it is provided. Thus, the services referred to in Article 13A(1)(b) are services encompassing a whole range of medical care normally provided on a non-profit-making basis in establishments pursuing social purposes such as the protection of human health, whilst the care referred to in letter (c) of the same provision is care provided outside hospital establishments and within the framework of a confidential relationship between the patient and the person providing the care, which is normally provided in the consulting room of the latter. The Commission refers in this connection to Case 353/85 Commission v United Kingdom [1988] ECR 817, paragraphs 32 and 33.

40The Commission adds that the fact that the term 'medical care' applies to the psychotherapeutic treatment at issue in the main proceedings is consistent with the purpose of the exemption provided for in Article 13A(1)(b) of the Sixth Directive because it 'is designed to ensure that the benefits flowing from [hospital and medical] care are not hindered by the increased costs of providing it that would follow if it, or closely related activities, were subject to VAT' (Commission v France, cited above, paragraph 23). Such treatment normally serves to treat an illness or any other health disorder and it should therefore be viewed as provision of care.

41The German Government maintains that Article 13A(1)(b) of the Sixth Directive refers only to 'ärztliche Heilbehandlungen' [literally, care by a doctor] in the strict sense of the term. It states that, unlike Article 13A(1)(c), that provision does not use the generic term 'heilbehandlung' ['care'] and does not draw a distinction between 'medical' and 'paramedical'.

— Findings of the Court

42According to the Court's case-law, the exemptions envisaged 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-2/95 SDC [1997] ECR I-3017, paragraph 20; and Kügler, cited above, paragraph 28). However, the interpretation of the terms used in that provision 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.

43It is apparent from the case-law that the objective of reducing the cost of medical care and making that care more accessible to individuals is common to both the exemption provided for in Article 13A(1)(b) of the Sixth Directive and that in letter (c) of the same provision (see Commission v France, cited above, paragraph 23; and Kügler, cited above, paragraph 29).

44It must also be borne in mind that the principle of fiscal neutrality precludes, inter alia, economic operators carrying on the same activities from being treated differently as far as the levying of VAT is concerned (Kügler, cited above, paragraph 30).

45As is clear from the answer given by the Court to the third question, the exemption provided for in Article 13A(1)(c) of the Sixth Directive applies to psychotherapeutic treatment given by qualified psychotherapists when that treatment is given outside bodies governed by public law and other establishments contemplated by Article 13A(1)(b).

46As regards the question of whether psychotherapeutic treatment given by qualified psychologists in a hospital environment is covered by the term 'medical care' in Article 13A(1)(b) of the Sixth Directive, it is clear, first, that only some language versions of the Directive, including the German and French versions, seem to draw a distinction between the nature of the care exempted under that provision and that of the care exempted under letter (c) of the same provision.

47Next, as correctly pointed out by the Advocate General in points 44 to 46 of her Opinion, the criterion for drawing a clear distinction between the two tax exemptions provided for in Article 13A(1)(b) and (c) is less the nature of the service than the place where it is provided. The Court has held that, under Article 13A(1)(b), it is appropriate to exempt services encompassing a whole range of medical care in establishments pursuing social purposes such as the protection of human health, whereas letter (c) of the same provision exempts services provided outside hospitals and within the framework of a confidential relationship between the patient and the person providing the care {Commission v United Kingdom, cited above, paragraph 33). Whilst it is true that the Court in that case found that the exemption of supplies of goods effected in connection with the provision of medical care envisaged in Article 13A(1)(c) could not be justified under letter (b) of the same provision, that interpretation follows inter alia from the fact that the latter provision covers duly recognised establishments pursuing social purposes and provides expressly for exemption of activities which are closely linked to medical care; the same cannot be said of Article 13A(1)(c).

48It should also be borne in mind that, given the objective of reducing health care costs, the term 'medical care' in Article 13A(1)(b) does not call for an especially narrow interpretation (see, to that effect, Commission v France, cited above, paragraph 23). However, the services covered by that term, like those covered by 'provision of medical care' in letter (c) of the same provision, must have as their purpose the diagnosis, treatment and, in so far as possible, cure of diseases or health disorders (D., cited above, paragraph 18; and Kügler, cited above, paragraph 38). It is not disputed that the treatment provided by qualified psychologists in a hospital environment fulfils the condition of having a therapeutic purpose.

49Lastly, it must be pointed out that that interpretation of the term 'medical care' in Article 13A(1)(b) is in keeping with the principle of fiscal neutrality because paramedical services, such as treatment given by qualified psychologists, are exempt from VAT regardless of where they are provided.

50It follows from the foregoing considerations that the term 'medical care' in Article 13A(1)(b) of the Sixth Directive must be interpreted as covering all provision of medical care envisaged in letter (c) of the same provision, including services provided by persons who are not doctors but who provide paramedical services, such as psychotherapeutic treatment given by qualified psychologists.

51Accordingly, the first question must be answered to the effect that psychotherapeutic treatment given in an out-patient facility of a foundation governed by private law by qualified psychologists who are not doctors is not an activity 'closely related' to hospital or medical care within the meaning of Article 13A(1)(b) of the Sixth Directive, except where such treatment is actually given as a service ancillary to the hospital or medical care received by the patients in question and constituting the principal service. However, the term 'medical care' in that provision must be interpreted as covering all provision of medical care envisaged in letter (c) of the same provision, including services provided by persons who are not doctors but who give paramedical services, such as psychotherapeutic treatment given by qualified psychologists.

The second question

52By its second question, the national court asks, first, whether the term 'other duly recognised establishments of a similar nature' in Article 13A(1)(b) of the Sixth Directive presupposes a formal recognition procedure of an out-patient facility of a foundation governed by private law or whether recognition of such an establishment may also derive, for example, from the fact that the cost of treatment given there is assumed by the social security authorities in accordance with applicable rules, which apply equally to hospitals, centres for medical treatment and other establishments. Second, it asks whether the fact that the social security authorities do not reimburse, or only partially reimburse, patients for the cost of such treatment justifies the preclusion of the exemption.

Observations submitted to the Court

53Dornier maintains that its out-patient facility, which is a centre for psychotherapeutic care and diagnosis, is an establishment similar in nature to bodies governed by public law, hospitals and centres for medical treatment or diagnosis envisaged in Article 13A(1)(b) of the Sixth Directive. The question of whether the facility has been 'duly recognised' for the purposes of that provision must, in Dornier's view, be answered by reference to national law. Dornier states that in Germany the law does not require such a facility to have an operating licence and no specific supervision of the establishment is prescribed. In the present case, only psychologists working there are, under the Heilpraktikergesetz, subject to supervision by the public health authorities of the city of Marburg.

54Dornier adds that the costs of the services provided in its out-patient facility have been reimbursed to the patients by statutory and private health insurance schemes in the same manner as the costs incurred for equivalent services provided by doctors practising psychotherapy. The reason why Dornier's bills were reimbursed at a reduced rate is the 'lower point value' of psychotherapeutic care; the same reduction applies to services provided by doctors recognised by the health schemes. Dornier submits that generally its out-patient facility was recognised as a provider under the statutory health insurance scheme.

55Dornier infers from the foregoing that its out-patient facility, which can operate without a licence and which provides psychotherapeutic treatment identical to that given by doctors, with a comparable rate of reimbursement, is an 'other duly recognised establishment of a similar nature' within the meaning of Article 13A(1)(b) of the Sixth Directive.

56According to the German Government, there is no need to answer the second question, since the psychotherapeutic treatment at issue in the main proceedings is not 'hospital' or 'medical' care within the meaning of Article 13A(1)(b) of the Sixth Directive. It submits in the alternative, however, that Community law does not provide any indication as to the recognition procedure, but rather allows the Member States broad discretion as to which establishments in the public health sector may be recognised. That that was the intention of the Community legislature is quite clear from the Council of the European Communities' travaux préparatoires for the Sixth Directive, which took place in 1974 and 1975. It is also expressed several times in the wording of Article 13A(1) of that directive.

57The German Government submits that, strictly speaking, such recognition would require a legal act, but it adds that no further specification is given. Accordingly, it is not necessary that recognition be legislative in nature as part of a national law transposing the Sixth Directive. It could also result from circumstances extraneous to tax law, such as the reimbursement of costs incurred for treatment provided by the establishment, as referred to by the national court. The German Government states that it is necessary, however, that a non-fiscal criterion be envisaged in the national VAT rules. Otherwise such rules would not be sufficiently precise to constitute a transposition measure.

58The German Government states that in Germany Paragraph 4(16)(c) of the UStG governs the conditions of recognition for VAT purposes. According to that provision, only those establishments which provide treatment under medical supervision and which, in the previous calendar year, provided at least 40% of their services to insured persons, persons in receipt of social assistance or persons entitled to maintenance or a pension may be regarded as 'other duly recognised establishments of a similar nature' for the purposes of Article 13A(1)(b) of the Sixth Directive. It is thus clear that, in Germany, the recognition of an establishment for reasons relating to the assumption of costs by the social security authorities does not necessarily lead to recognition for VAT purposes.

59The German Government adds that it must be for the national legislation to determine whether the exemption is inapplicable in so far as the social security authorities do not reimburse, or only partially reimburse, patients for the costs of psychotherapeutic treatment given by qualified psychologists who are not doctors.

60The Danish Government submits that the reference to 'other duly recognised establishments of a similar nature' in Article 13A(1)(b) of the Sixth Directive does not entail a formal recognition procedure. Recognition might also follow from other circumstances, such as the fact that the treatment in question is reimbursed under the public health insurance scheme.

61The Commission observes that the Sixth Directive does not provide for any formal recognition procedure. It is thus for the national legislature to specify the form that recognition is to take, which may also follow from circumstances extraneous to tax law, provided they relate to activities which generate turnover. Conditions for reimbursement of costs incurred for treatment by health insurance schemes or other social security authorities are one example. It is for the national court to determine in each case whether those conditions are satisfied.

62The Commission submits, however, that assumption of only part of the costs of the care in question may not give rise to partial recognition of establishments. It submits that the same treatment must be taxable or exempt, as the case may be, in its entirety. Rules which allow for partial recognition of establishments based on the rate of reimbursement of the costs incurred are neither clear nor foreseeable. Accordingly, such rules would hardly be conducive to ensuring proper and straightforward application of the tax exemption.

63According to the Commission, the prices applied and thus the cost of care provided by the establishments in question are other factors to be taken into account in the recognition process. It points out that Article 13A(2)(a) of the Sixth Directive authorises the Member States to make the granting of the exemption provided for in Article 13A(1)(b) subject to certain conditions to be complied with by bodies other than those governed by public law, such as relatively low prices and the lack of systematic pursuit of profit. The Commission adds that all of the exemptions referred to in Article 13A are intended to reduce the costs of certain activities in the public interest.

Grounds

Findings of the Court

64As regards the term 'other duly recognised establishments of a similar nature', Article 13A(1)(b) of the Sixth Directive does not specify the conditions and procedures for that recognition. It is thus, in principle, for the national law of each Member State to lay down the rules according to which such recognition may be granted to establishments which request it.

65The adoption of national rules in this area is, moreover, provided for in Article 13A(2)(a) of the Sixth Directive, which states that 'Member States may make the granting to bodies other than those governed by public law of each exemption provided for in (1)(b)... subject in each individual case to one or more of the... conditions' referred to therein.

66However, since Article 13A(2)(a) does not require the Member States to take such measures, the fact that a Member State has not exercised that option does not affect the possibility that an establishment may be recognised for the purposes of granting the exemptions referred to.

67In addition, no provision of the Sixth Directive requires that recognition be granted in accordance with a formal procedure or that it be provided for expressly in national tax provisions.

68According to the German Government, Paragraph 4(16)(c) of the UStG lays down the national rules relating to the recognition of an establishment for the purposes of granting the exemption provided for in Article 13A(1)(b) of the Sixth Directive. It follows that a foundation governed by private law may be granted that exemption if it fulfils the conditions established under national law, including the condition requiring that the treatment be provided under medical supervision.

69It should be borne in mind in this context that, as regards Article 13A(1)(g) of the Sixth Directive, the Court has held that where a taxable person seeks the status of charitable organisation, it is for the national courts to examine whether the competent authorities have observed the limits on their discretion under that provision while applying Community principles, in particular the principle of equal treatment (Kügler, cited above, paragraph 56).

70It follows from the answer given by the Court to the first question that the condition requiring that the treatment be provided under medical supervision, in so far as it is intended to preclude the exemption from applying to treatment given under the sole responsibility of members of paramedical professions, goes beyond the limits of the discretion allowed to the Member States under Article 13A(1)(b) of the Sixth Directive. The term 'medical care' in that provision covers not only treatment provided directly by doctors or other health professionals under medical supervision, but also paramedical services given in hospitals under the sole responsibility of persons who are not doctors.

71It follows that, for the purposes of the exemption provided for in Article 13A(1)(b) of the Sixth Directive, a Member State may not validly make recognition of establishments subject to a condition requiring that paramedical services provided by those establishments be given under medical supervision.

72In paragraphs 57 and 58 of Kügler, cited above, the Court added that, in order to determine which organisations should be recognised as charitable within the meaning of Article 13A(1)(g) of the Sixth Directive, the national authorities should, in accordance with Community law and subject to review by the national courts, take a number of factors into consideration. Those factors include the public interest of the activities of the taxable person in question, the fact that other taxable persons carrying on the same activities already have similar recognition, and the fact that the costs incurred for the treatment in question may be largely met by health insurance schemes or other social security bodies.

73As correctly pointed out by the Advocate General in point 55 of her Opinion, those statements appear to apply equally to the interpretation of Article 13A(1)(b) of the Sixth Directive as regards recognition of the establishments referred to in that provision.

74In the case in the main proceedings, it is therefore for the national court to determine, in the light of all of those factors, whether the refusal to recognise Dornier for the purposes of the exemption provided for in Article 13A(1)(b) of the Sixth Directive gives rise to an infringement of the principle of equal treatment as compared to other operators providing the same treatment in comparable situations.

75It is in this light that it is appropriate to take account of the fact that the social security authorities do not reimburse, or only partially reimburse, patients for the costs of psychotherapeutic treatment. If Dornier's situation is comparable in this respect to that of other operators providing the same treatment, the mere fact that the cost of that treatment is not fully covered by the social security authorities does not justify a difference in the treatment of providers for VAT purposes.

76Accordingly, the second question must be answered to the effect that the recognition of an establishment for the purposes of Article 13A(1)(b) of the Sixth Directive does not presuppose a formal recognition procedure; nor must such recognition necessarily derive from national tax law provisions. Where the national rules pertaining to recognition contain restrictions which exceed the limits of the discretion allowed to Member States under that provision, it is for the national court to determine, in the light of all the relevant facts, whether a taxable person must none the less be regarded as an 'other duly recognised establishment of a similar nature' within the meaning of that provision.

The fourth question

77By its fourth question, the national court asks whether, in circumstances such as those in the main proceedings, the provisions of Article 13A(l)(b) and (c) of the Sixth Directive may be relied on by a taxable person before a national court in order to obtain an exemption for treatment provided by it.

78It must be borne in mind that, in accordance with settled case-law (see, in particular, Case 8/81 Becker [1982] ECR 53, paragraph 25; Case C-193/91 Mohsche [1993] ECR I-2615, paragraph 17; Case C-134/99 IGI [2000] ECR I-7717, paragraph 36; and Kügler, cited above, paragraph 51), wherever the provisions of a directive appear, so far as their subject-matter is concerned, to be unconditional and sufficiently precise, those provisions may, in the absence of implementing measures adopted within the prescribed period, be relied upon as against any national provision which is incompatible with the directive or in so far as the provisions define rights which individuals are able to assert against the State.

79In addition, although Article 13A(1) of the Sixth Directive provides that the Member States are to apply the exemptions prescribed by that provision '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', a Member State may not rely, as against a taxpayer who is able to show that his tax position actually falls within one of the categories of exemption laid down in the Sixth Directive, on its failure to adopt the very provisions which are intended to facilitate the application of that exemption (Kügler, cited above, paragraph 52).

80As regards the content of Article 13A(1)(b) and (c) of the Sixth Directive, the Court finds that, contrary to the assertions of the German Government, those provisions indicate in a sufficiently precise and unconditional manner the activities to which the exemption applies (see, by analogy, as regards Article 13A(1)(g) of the Sixth Directive, Kügler, cited above, paragraph 53).

81The fact that those provisions confer discretion on the Member States to determine, first, which establishments are not 'governed by public law' but which may benefit from the exemption provided for in Article 13A(1)(b) and, second, for which paramedical professions the exemption provided for in letter (c) of the same provision may be granted, does not prevent individuals who, according to objective criteria, provide treatment in the public interest envisaged by those exemptions, from relying directly on the provisions of the Sixth Directive as against national provisions which do not comply with that directive.

82In the present case, it follows from the answer given to the second question that the national rules pertaining to recognition of an establishment for the purposes of the exemption provided for in Article 13A(1)(b) of the Sixth Directive contain a restriction incompatible with the terms of that provision. The taxable person may therefore rely directly, in the national court, on Article 13A(1)(b) of the Sixth Directive to contest the application of a rule of national law requiring that the treatment be provided under medical supervision. However, it also follows from the answer to the second question that, in order for it to obtain recognition as an 'other duly recognised establishment of a similar nature' and thus to benefit from the exemption provided for in Article 13A(1)(b) of the Sixth Directive, the national court must determine, in the light of all the relevant factors, in particular the circumstances of the case in the main proceedings, whether the taxable person satisfies the conditions of application of that exemption.

83As far as the exemption provided for in Article 13A(1)(c) of the Sixth Directive is concerned, it follows from the answer given to the third question that that exemption applies to psychotherapeutic treatment provided by a foundation governed by private law and given by psychotherapists employed by the foundation. Consequently, that provision may be relied on by a taxable person as against national legislative provisions or administrative practices which make the exemption subject to the provider's having a specified legal form.

84Accordingly, the fourth question must be answered to the effect that, in circumstances such as those in the main proceedings, Article 13A(1)(b) and (c) of the Sixth Directive may be relied on by a taxable person before a national court in order to contest the application of rules of national law which are incompatible with that provision.

Costs

Costs

85The costs incurred by the German and Danish Governments and by the Commission, which have submitted observations to the Court, are not recoverable. Since these proceedings are, for the parties to the main proceedings, a step in the proceedings pending before the national court, the decision on costs is a matter for that court.

Operative part

On those grounds,

THE COURT (Fifth Chamber),

in answer to the questions referred to it by the Bundesfinanzhof by order of 14 December 2000, hereby rules:

1. Psychotherapeutic treatment given in an out-patient facility of a foundation governed by private law by qualified psychologists who are not doctors is not an activity 'closely related' to hospital or medical care within the meaning of Article 13A(1)(b) 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, except where such treatment is actually given as a service ancillary to the hospital or medical care received by the patients in question and constituting the principal service. However, the term 'medical care' in that provision must be interpreted as covering all provision of medical care envisaged in letter (c) of the same provision, including services provided by persons who are not doctors but who give paramedical services, such as psychotherapeutic treatment given by qualified psychologists.

2. Recognition of an establishment for the purposes of Article 13A(1)(b) of the Sixth Directive 77/388 does not presuppose a formal recognition procedure; nor must such recognition necessarily derive from national tax law provisions. Where the national rules pertaining to recognition contain restrictions which exceed the limits of the discretion allowed to Member States under that provision, it is for the national court to determine, in the light of all the relevant facts, whether a taxable person must none the less be regarded as an 'other duly recognised establishment of a similar nature' within the meaning of that provision.

3. Since the exemption envisaged in Article 13A(1)(c) of the Sixth Directive 77/388 is not dependent on the legal form of the taxable person providing the medical or paramedical services referred to in that provision, psychotherapeutic treatment provided by a foundation governed by private law and given by psychotherapists employed by the foundation may benefit from that exemption.

4. In circumstances such as those in the main proceedings, Article 13A(1)(b) and (c) of the Sixth Directive 77/388 may be relied on by a taxable person before a national court in order to contest the application of rules of national law which are incompatible with that provision.

Edward Jann Rosas

Delivered in open court in Luxembourg on 6 November 2003.

R. Grass V. Skouris

Registrar President

OPINION OF ADVOCATE GENERAL STIX-HACKL delivered on 10 December 2002 1

I — Introduction

1By the four questions it has referred, the Bundesfinanzhof (Federal Finance Court) asks whether psychotherapeutic treatment, given in an out-patient facility by a foundation employing qualified psychologists who are not registered as doctors, is to be exempted from VAT in accordance with the two tax exemptions provided for in the Sixth VAT Directive (hereafter 'the Sixth Directive') relating respectively to hospital and medical care, and medical care.

2The Sixth Directive provides that hospital and medical care and closely related activities undertaken by bodies governed by public law or comparable bodies are to be exempt from tax. It also provides that the provision of medical care in the exercise of the medical and paramedical professions is likewise to be exempted from VAT. After the claimant foundation had been refused the latter tax exemption for reasons to be considered in more detail below, it sought to persuade the national appeal court to interpret the former tax exemption broadly.

3Accordingly, by its first two questions the national court asks in substance whether the former tax exemption is available in the present case. The third question relates to the latter tax exemption. The fourth question concerns the potential direct effect of the two tax exemptions.

II — Legal framework

A — Community law

4Article 13A(1)(b) and (c) of the Sixth Directive provide:

'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:

(b) hospital and medical care and closely related activities undertaken by bodies governed by public law or, under social conditions comparable to those applicable to bodies governed by public law, by hospitals, centres for medical treatment or diagnosis and other duly recognised establishments of a similar nature;

(c) the provision of medical care in the exercise of the medical and paramedical professions as defined by the Member State concerned.'

5Article 13A(2) of the Sixth Directive provides:

'(a) Member States may make the granting to bodies other than those governed by public law of each exemption provided forin (1)(b),(g),(h),(i),(l),(m) and (n) of this Article subject in each individual case to one or more of the following conditions:

— they shall not systematically aim to make a profit, but any profits nevertheless arising shall not be distributed, but shall be assigned to the continuance or improvement of the services supplied,

— they shall be managed and administered on an essentially voluntary basis by persons who have no direct or indirect interest, either themselves or through intermediaries, in the results of the activities concerned, — they shall charge prices approved by the public authorities or which do not exceed such approved prices or, in respect of those services not subject to approval, prices lower than those charged for similar services by commercial enterprises subject to value added tax,

— exemption of the services concerned shall not be likely to create distortions of competition such as to place at a disadvantage commercial enterprises liable to value added tax.

(b) The supply of services or goods shall not be granted exemption as provided those of commercial enterprises liable for value added tax.'

B — National law

6As in force at the relevant time, Paragraph 4 of the German Umsatzsteuergesetz 1980 (Law on Turnover Tax, hereafter 'the UStG') 3 provided as follows:

'The following transactions covered by Paragraph 1(1)(1) to 1(1)(3) are exempt: 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 14. transactions arising from the pursuit of the profession of doctor, dentist, natural medical practitioner, physiotherapist, mid wife or a similar professional medical activity for the purposes of Paragraph 18(1)(1) of the Einkommensteuergesetz [Law on Income Tax] or pursuit of the profession of clinical chemist. Other supplies of goods and services by associations whose members belong to the professions set out in the first sentence are also exempt vis-à-vis their members in so far as those supplies are directly used to carry out transactions exempt under the first sentence.

16. transactions closely linked with the operation of hospitals, diagnostic clinics and other bodies providing medical care, diagnoses or clinical results and of old people's homes, residential accommodation for the elderly and nursing homes, where:

(a) those bodies are run by legal persons governed by public law or (c) in the case of diagnostic clinics and other establishments providing treatment by doctors, diagnoses or clinical results, the services are provided under the supervision of a doctor and in the previous calendar year at least 40% of the services are provided to the persons specified in number (15)(b)...'.

7Paragraph 4(15)(b) of the UStG specifies the following persons:

'insured persons, persons in receipt of social assistance or... persons entitled to maintenance.'

8According to the case-law of the Bundesverfassungsgericht (Federal Constitutional Court), Article 3(1) of the Grundgesetz (Basic Law) means that the question whether medical activities are exempt from turnover tax does not depend solely on legal form. Accordingly, exemption from tax of the activities of a person who practises the professions listed in Paragraph 4(14)(1) of the UStG is not limited to the person who actually practises the profession but can also be claimed by a partnership or a company.

III — Facts and questions

9The Christoph-Dornier-Stiftung für Klinische Psychologie (hereafter 'the foundation') is a charitable foundation established under private law. According to the order of the national court, its object is to develop the practice of and research into clinical psychology. It also aims at improving methods of treatment by appropriate theoretical and practical research and at making important results of clinical psychological research available to the public. For these purposes, it maintains an out patient facility in which patients are given psychotherapeutic treatment by qualified psychologists employed by the foundation.

10In 1990, the year to which the dispute relates, the qualified psychologists the foundation employed were not doctors. However, they were licensed to practise under the Heilpraktikergesetz (Medical Practitioners Law) and had received further education to qualify as psychotherapists.

11More than 40% of the services the foundation provided in 1990 were provided to persons insured under the compulsory social insurance scheme, to persons in receipt of social assistance or to persons entitled to maintenance. The foundation's board members and principal employees were psychotherapists who were licensed as medical practitioners.

12In 1990, the Finanzamt (Finance Office) taxed the services supplied by the foundation at a reduced rate of tax under Paragraph 12(2)(8) of the UStG. Disagree ing with the foundation, it took the view that the transactions were not exempt from tax under Paragraph 4(16)(c) of the UStG.

13The foundation contested its tax assessment for 1990 before the Finanzgericht (Finance Court). It argued that if applied in accordance with the constitution and the Sixth Directive the conditions for exemption in question covered not only 'services provided under supervision of a doctor' but also services provided by establishments offering psychotherapeutic treatment where they were supervised not by doctors but by qualified psychologists holding a further education qualification, similar to that of a specialist doctor, in psychotherapy and licensed as medical practitioners. The refusal of the tax exemption created a difference in treatment, without any substantive reason, compared with the taxation of comparable services provided under the supervision of a doctor.

14The Finanzgericht was of the view that neither Article 13A(1)(b) of the Sixth Directive nor constitutional considerations required that Paragraph 4(16)(c) of the UStG be applied more broadly than its wording entailed. It accordingly rejected the claim on the ground that the foundation had not provided the services specified in Paragraph 4(16)(c) of the UStG under the supervision of doctors.

15The foundation appealed against this judgment to the Bundesfinanzhof. The latter stayed the proceedings and referred the following four questions to the Court for a preliminary ruling:

'1. Does psychotherapeutic treatment, given in an out-patient facility provided by a foundation (charitable establishment) employing qualified psychologists who are licensed under the Heilpraktikergesetz but who are not registered as doctors, qualify as "closely related activities" to hospital and medical care within the meaning of Article 13A(1)(b) of Directive 77/388?

2. In order for there to be an "other duly recognised establishment of a similar n a t u r e" within the meaning of Article 13A(1)(b) of Directive 77/388, must there be a formal recognition procedure or can recognition also derive from other regulations (e.g. regulations concerning the assumption of costs by authorities responsible for the provision of social security) which apply equally to hospitals, centres for medical treatment and other establishments?

Is an exemption from tax unavailable to the extent that the authorities responsible for providing social security do not reimburse, or only partially reimburse, patients for the costs of psychotherapeutic treatment given by the aforementioned employees of the plaintiff?

3. Is the psychotherapeutic treatment provided by the claimant exempt from tax on the basis of the neutrality of value added tax, because the psychotherapists it employs could have provided the same treatment on a tax-exempt basis under Article 13A(1)(c) of Directive 77/388 if they had provided it themselves as self-employed taxable persons?

4. Is the claimant entitled to rely on the tax exemption of its transactions involving psychotherapeutic treatment under Article 13A(1)(b) and (c) of Directive 77/388?'

IV — Analysis of the questions referred

16The questions referred concern on the one hand the conditions of the exemption provided for in Article 13A(1)(b) of the Sixth Directive and on the other the conditions of the exemption provided for in Article 13A(1)(c) of the Sixth Directive.

17Although the fact that the foundation provides treatment in an out-patient facility suggests that the latter exemption may be available, the first two questions refer principally to the exemption provided for in letter (b). Obviously, this is a consequence of the fact that at the time the main proceedings were raised the national measures transposing the tax exemption under Article 13A(1)(c) (hereafter 'letter (c)') had not ensured that legal and natural persons were given identical treatment, and such an exemption was therefore unavailable. The dispute in the proceedings accordingly concentrated on the tax exemption under letter (b).

18Before the national court, the claimant in the main proceedings argued in particular that Paragraph 4(16) of the UStG 1980 (the national law intended to transpose Article 13A(1)(b) (hereafter 'letter (b)') of the Sixth Directive) was incompatible with Community law, since it made the tax exemption dependent on whether the treatment was provided under the supervision of a doctor. The Sixth Directive did not provide for such a condition.

A — The first and second questions

19In the opinion of the national court, the availability of the tax exemption under letter (b) depends first on whether the foundation made supplies which are to be regarded as activities closely related to hospital or medical care. This view presupposes that the psychotherapeutic treatment provided by the foundation constituted neither hospital nor medical care in the sense of medical care provided under the supervision of recognised doctors.

20Given that the foundation was not a body governed by public law, a hospital or a centre for medical treatment or diagnosis, a further condition of the availability of the letter (b) tax exemption was that the foundation be an 'other duly recognised establishment' within the meaning of that provision.

21Since the first two questions thus concern Article 13A(1)(b) of the Sixth Directive and require a certain basic understanding of that provision, I shall consider them together.

1. Submissions of the parties

22The foundation began by criticising the Bundesfinanzhofs question and explained that the treatment provided by the psychotherapists it employed encompassed the diagnosis, treatment and cure of psychological diseases and disorders, and was therefore medical care concerning the health of persons within the meaning of the judgment of the Court in Case C-384/98 D v W. 4

23The foundation emphasised that this issue depended on the substance of the supply and not on formal licensing as a doctor or as a paramedic equated in law to a doctor. It followed that 'medical care' included not only treatment provided by doctors but also treatment provided by a licensed practitioner of a medical profession whose qualification was comparable to that of a doctor, as was that of the qualified psychologists in the present case.

24The German Government firmly rejected this view, most emphatically in the oral hearing, and submitted that Article 13A(1)(b) of the Sixth Directive should not be interpreted too broadly, if only to give proper weight to its nature as an exception to the general rule. It relied on the judgment of the Court in Commission v France, 5 in which the Court held that the contested tax exemption was designed to ensure the availability of low-cost access to hospital and medical care. In its opinion, other forms of medical care were not to be given the same privilege. The German Government considered its view to be supported by the fact that in contrast to letter (c), letter (b) did not draw a distinction between 'medical' and 'paramedical'.

25The German Government also submitted that the psychotherapeutic treatment the foundation provided was not 'closely related activities', since the foundation's activity was self-contained and the disputed treatment was not provided in combination with any further medical care.

26The Danish Government likewise submitted that the tax exemption under letter (b) should be interpreted narrowly. In its view, the exemption was subject to the condition that the exempt treatment constituted either hospital care or medical care in the sense of medical care provided by a licensed doctor, or was sufficiently closely related to an actual supply of such hospital or medical care.

27According to the Commission, by its first question the national court was asking whether the disputed psychotherapeutic treatment, which was not provided by licensed doctors, constituted 'medical care' and/or 'closely related activities' to such care.

28The Commission supported a broad interpretation such that 'medical care' in letter (b) and 'the provision of medical care' in letter (c) encompassed fundamentally the same supplies, namely medical care concerning the health of persons. In this connection, the Commission emphasised that the supplies covered by letter (b) and by letter (c) respectively differed less in their substance than in the form in which they were provided.

29Moreover, to regard the disputed psychotherapeutic treatment as 'medical care' would be consistent with the purpose of the letter (b) tax exemption. In support of this proposition, the Commission referred to the judgment in Commission v France 7i n which the Court held that the tax exemption under letter (b) was designed 'to ensure that the benefits flowing from such care are not hindered by the increased costs of providing it that would follow if it, or closely related activities, were subject to VAT'. The Commission added that the present case did not concern activities closely related to actual medical care, as the contested psychotherapeutic treatment was supplied on a stand-alone basis.

30The Commission was therefore of the opinion that whether the letter (b) tax exemption was available in the present case depended on whether the foundation was to be regarded as an 'other duly recognised establishment of a similar nature'. As regards the second question, which relates to this point, both the Commission and the Danish Government pointed out that the Sixth Directive did not lay down any formal recognition procedure. Accordingly, how recognition was granted was a matter for national law.

31However, the Commission did emphasise that recognition could depend on conditions outside tax law, provided they referred to the activity undertaken. In this regard, it considered that the assumption of costs by authorities responsible for the provision of social security could constitute recognition. However, in its opinion the assumption of part only of the costs could not constitute partial recognition of the establishment concerned.

32On the question of recognition of the establishment concerned, the foundation too proceeded on the basis that it was a matter for national law. It added that the costs of its supplies were assumed in exactly the same way as those of corresponding medical supplies, and that it followed that the foundation had been recognised by national law.

33Given its answer to the first question, the German Government considered it to be unnecessary to answer the second question. On a subsidiary basis, it submitted that the recognition procedure was a matter for national law. It was not in principle impossible that recognition could be granted on the basis of criteria outside tax law, for example the reimbursement of costs by authorities responsible for the provision of social security; however, for that purpose, it was essential that the national VAT provisions referred to those criteria. The German Government emphasised that German law required the establishments to provide their services under the supervision of a doctor.

2. Analysis

The nature of the supplies

34The letter (b) tax exemption is not available unless the disputed psychotherapeutic treatment may be classified either as medical care or as activities closely related to such care. It is not disputed that the criterion of hospital care is not relevant.

35It must first be observed that in accordance with settled case-law, the tax exemptions constitute independent concepts of Community law which must be placed in the general context of the common system of VAT introduced by the Sixth Directive.

36It appears questionable that the disputed psychotherapeutic treatment falls within the concept of activities closely related to medical care. The Commission referred to the judgment in Commission v France, according to which that concept refers to the relationship of an ancillary supply to the principal supply. However, the supplies in the present case are apparently unconnected to any other medical supplies: they are not provided within the framework of hospital care; nor can they be regarded as supplementary to any medical care provided by licensed doctors.

37According to the judgment in Card 10 Protection Plan 'a service must be regarded as ancillary to a principal service if it does not constitute for customers an aim in itself, but a means of better enjoying the principal service supplied'. Since the disputed supplies are stand-alone supplies in that they are not related to any hospital or medical care, they cannot be classified as ancillary supplies. Accordingly, they are not 'closely related activities' to medical care.

38By its first question the national court is clearly to be understood as asking also whether and, if so, to what extent the disputed psychotherapeutic treatment is to be classified as medical care.

39In this connection, the question arises in the present case as to whether the fact that the disputed psychotherapeutic treatment is not provided by licensed doctors is in itself sufficient to preclude subsuming it within the concept of 'medical care'.

40The proposition that it should not be classified as 'medical care' is clearly supported by the requirement that the tax exemptions envisaged by Article 13 of the Sixth Directive are to be interpreted strictly since these exemptions constitute exceptions to the general principle that turnover tax is to be levied on all services supplied for consideration by a taxable person. 1

41However, the purpose of this requirement suggests that the provision should not be interpreted so narrowly. The requirement is intended to ensure that the tax privilege granted by Article 13 to certain supplies is granted only to those supplies which accord with the purpose for which the privilege is granted. As regards the privileges granted to medical supplies by Article 13A(1)(b) or (c) of the Sixth Directive, the requirement to interpret exceptions narrowly is therefore properly taken into account where the question is as to whether or not all supplies provided by a doctor in the course of his profession are to be exempted from tax. However, the present case concerns not whether a distinction should be drawn between different activities carried out by a doctor but the tax treatment of supplies which, it is not disputed, would attract the tax privilege if they were carried out by a licensed doctor.

42The German Government does not dispute the proposition that the disputed psychotherapeutic treatment concerns the health of persons. Accordingly, it falls within the definition of medical care in letter (c), established by the Court as being medical care concerning the health of persons.

43It follows that in principle, the requirement to interpret the exemption conditions in Article 13 of the Sixth Directive strictly does not prevent treating psychotherapeutic treatment in the same way irrespective of whether the person providing it is licensed as a doctor for the purposes of letter (b). However, what is questionable is the significance of the point that the German versions of letters (b) and (c) use different wording to refer to medical care: whereas letter (b) refers to 'medical care provided by a doctor' (ärtzliche Heil behandlung), letter (c) refers to 'medical care concerning the health of persons' (Heilbehandlungen im Bereich der Human medizin).

44The Court's most recent discussion of the relationship between the two exemptions is in its judgment in Kügler. In that judgment the Court stated, '[i]t follows that Article 13A(1)(b) and (c) of the Sixth Directive, which have separate fields of application, are intended to regulate all exemptions of medical services in the strict sense. Article 13A(1)(b) exempts all services supplied in a hospital environment while Article 13A(1)(c) is designed to exempt medical services provided outside such a framework, both at the private address of the person providing the care and at the patient's home or at any other place'.

45That indicates that the Court considers it possible to draw a clear distinction between the two tax exemptions, but that the criterion is less the substance of the supply than the place it is provided. In expressing this view, the Court referred to its judgment in Commission v United Kingdom. In that judgment the Court held that in contrast to letter (b), which exempted services encompassing a whole range of medical care normally provided on a non-profit-making basis in establishments pursuing social purposes such as the protection of human health, letter (c) exempted services provided outside hospitals within the framework of a confidential relationship between the patient and the person providing the care.

46The difference between the definitions of the two tax exemptions seems to be that the exemptions relate to activities which are carried out in different places: under letter (b), in establishments pursuing social purposes, and under letter (c), in other places, in particular in consulting rooms. By contrast, the substance of the activity appears not to be definitive, with the consequence that the difference between the wording of the two sets of conditions for exemption cannot preclude the application of the letter (b) exemption to the disputed psychotherapeutic treatment.

47Moreover, subsuming the disputed psychotherapeutic treatment within the concept of 'medical care' is consistent with both the purpose of the tax exemption and the principle of the neutrality of VAT.

48As regards the purpose of the tax exemption for medical care, the Court has repeatedly held that such a privilege is designed, 'to ensure that the benefits flowing from such care are not hindered by the increased costs of providing it that would follow if it, or closely related activities, were subject to VAT.' The costs depend far less on the identity of the person giving the treatment than on the substance of the services.

49In its judgment in Kügler, the Court moreover recalled that, '[t]he principle of fiscal neutrality precludes, inter alia, economic operators carrying on the same activities from being treated differently as far as the levying of VAT is concerned'. To the extent that the foundation's employees have the necessary professional training as qualified psychologists having received further education to qualify as medical practitioners, such that their services are equivalent to services supplied by specialist doctors with equivalent qualifications, the principle of fiscal neutrality precludes treating the services provided by the two professions differently.

50Finally, consideration must be given to the argument that applying letter (b) to psychotherapeutic treatment of the type in question would create an overlap between the field of application of letter (b) and letter (c).

51The clear distinction drawn in the 18 Court's case-law suggests that as a rule there should be no overlap. In my opinion, the finding in paragraph 36 of Kügler cannot be understood as meaning that the fact that the disputed psychotherapeutic treatment is provided in an out-patient facility in itself precludes the application of letter (b). Whether that circumstance affects the availability of the letter (b) tax exemption is instead to be examined in the context of the question whether the facility is an 'other duly recognised establishment'. Recognition of the foundation

52Given the general agreement between the submissions of the parties and the judgment in Kügler, I need discuss the question as to recognition of the foundation only briefly. Admittedly, Kügler concerned the tax exemption under Article 13A(1)(g) of the Sixth Directive and the reference therein to organisations recognised as charitable. None the less, that tax exemption appears to be similar to the letter (b) tax exemption: its availability likewise depends both on the substance of the supply and on the place it is provided, and letter (g) refers also to bodies governed by public law and similar organisations recognised as charitable by the Member State concerned. The wording of letter (g) is clearer only in so far as it expressly refers to the competence of the Member State to grant the recognition required.

53In the present case it is not in dispute that there being no relevant provision in the Sixth Directive, the question whether an establishment has been duly recognised for the purposes of the letter (b) tax exemption is to be answered by reference to national law. For that reason, the judgment in Kügler is applicable: according to it, '[i]t will... be for the national authorities, in accordance with Community law and subject to review by the national courts, to determine, in the light in particular of practice followed by the competent administrative body in analogous situations, which organisations should be recognised as charitable within the meaning of Article 13A(1)(g) of the Sixth Directive'.

54As regards the question as to which national provisions are to be taken into account, the Court continued: 'In the main proceedings, the national court will thus be able to take into account the existence of specific provisions, be they national or regional, legislative or administrative, or tax or social security provisions, the fact that associations carrying on the same activities as the claimant in the main proceedings are already entitled to a similar exemption, given the public interest inherent in those activities, and the fact that the costs of the services supplied by the claimant in the main proceedings may be largely met by statutory health funds or by social security bodies with which private operators such as the claimant in the main proceedings have contractual relations'.

55Because of the similarity between the substance of letter (g) and of letter (b), these statements appear to apply equally to the interpretation of letter (b).

56On the basis of the foregoing considerations, I suggest that the answer to the first and second questions should be that psychotherapeutic treatment, given in an out patient facility by a foundation employing qualified psychologists who are not registered as doctors, qualifies as 'medical care', and therefore not as 'closely related activities'; to such care, within the meaning of Article 13A(1)(b) of Sixth Directive 77/388. It is for the national court to establish, in the light of all relevant factors, whether the taxable person is a 'duly recognised establishment of a similar nature' for the purposes of Article 13A(1)(b) of the Sixth Directive.

B — The third question

1. Submissions of the parties

57The parties differ as to whether it is necessary to answer the third question. By contrast, they largely agree as to how the substance of the question should be answered.

58The German Government was of the view that there was no need for an answer since letter (b) was a lex specialis compared with letter (c) and therefore ousted the latter provision. The Commission pointed out that the Bundesfinanzhof referred the third question only in case the letter (b) tax exemption was not available. Since it was for the national court to establish whether the letter (b) tax exemption was available in the present case, it was necessary to answer the third question.

59As regards the relationship between the tax exemptions under letter (b) and letter (c), the foundation submitted that because of the principle of the neutrality of VAT letter (c) was the lex specialis compared with letter (b). If 'medical care' in letter (b) were interpreted broadly, in the way the foundation suggested, 'paramedical professions' within the meaning of letter (c) would be covered by letter (b) too. The foundation submitted that it was accordingly necessary to answer the third question.

60As regards the substance of the question, the foundation submitted in summary that the services supplied by the employed psychotherapists would have been exempt from tax if the psychotherapists had supplied them in the course of a self-employed practice. In this connection, the foundation emphasised that irrespective of the existence of a contract of employment the psychotherapists carried out their activity on their own responsibility and applying their expertise independently.

61The German Government likewise submitted that the psychotherapists employed by the foundation could have provided the same treatment on a tax-exempt basis if they had provided it independently as taxable persons, since psychotherapeutic services of qualified psychologists were 'medical care' within the meaning of Article 13A(1)(c) of the Sixth Directive.

62Both the Danish Government and the Commission emphasised that the field of application of Article 13A(1)(c) of the Sixth Directive was not restricted to natural persons.

2. Analysis

63I should like first to observe that I think it necessary to answer the third question irrespective of what the relationship discussed above between the letter (b) tax exemption and the letter (c) tax exemption may be. As the Commission observed, it is for the national court to establish whether the letter (b) tax exemption is available in the present case.

64However, it appears to be unnecessary to consider the parties' submissions individually, since the answer to the third question may be taken directly from Kügler.

65By its first question in Kügler, the Bundesfinanzhof asked whether the tax exemption envisaged in Article 13A(1)(c) of the Sixth Directive was dependent on the legal form of the taxable person supplying the medical or paramedical services referred to in that provision. On that point, the Court held that 'the exemption envisaged in Article 13A(1)(c) of the Sixth Directive is not dependent on the legal form of the taxable person supplying the medical or paramedical services referred to in that provision'.

66The reason the Court gave for its decision was that the wording of Article 13A(1)(c) did not make the tax exemption dependent on whether the taxable person was endowed with a particular legal form. It was enough that medical (or paramedical) services were involved and were supplied by persons who possessed the necessary professional qualifications. The Court also emphasised that such an interpretation was consistent with the objective of reducing the cost of medical care. Finally, the Court stated that such an interpretation was consistent with the principle of fiscal neutrality, which precluded, inter alia, economic operators carrying on the same activities from being treated differently as far as the levying of VAT was concerned.

67Since it is not disputed in the main proceedings that the qualified psychologists employed by the foundation supply medical care and possess the necessary professional qualifications, it appears that the answer to the first question in Kügler may be applied directly to the present case.

C — The fourth question

1. Submissions of the parties

68The fourth question concerns the potential direct effect of the tax exemptions provided for in letter (b) and letter (c) of Article 13A(1) of the Sixth Directive.

69The foundation referred in particular to what it considered to be the incorrect transposition of the Sixth Directive in the Federal Republic of Germany. In transposing Article 13A(1)(b) of the Sixth Directive, the national legislature had made the tax exemption subject to an additional condition, namely that the supplies had to be provided 'under the supervision of a doctor'. This gave rise to a difference in treatment between certain medical supplies which were excluded from the tax exemption in the Federal Republic of Germany and identical supplies to which other Member States did grant the exemption, and this infringed the principle of fiscal neutrality. The foundation submitted that national law required to be interpreted in conformity with the Sixth Directive and therefore disregarding the condition it considered to infringe the Sixth Directive.

70The German Government disputed the proposition that the letter (b) and the letter (c) tax exemptions had direct effect, since neither was, so far as its subject-matter was concerned, unconditional. Letter (b) provided that the tax exemption was dependent on recognition of the establishment concerned by the Member State, and to that extent the Member State accordingly had a margin of discretion. Under letter (c), it was likewise for the Member State to define the scope of the medical and paramedical professions.

71The Commission considered that the possibility Article 13A(2)(a) of the Sixth Directive granted to the Member States (in particular in relation to letter (b)) of making the grant of the tax exemptions subject to certain conditions did not in principle affect the conclusion that Article 13A(1) had direct effect. Nor did Article 13A(2)(b) of the Sixth Directive preclude Article 13A(1) from having direct effect, since that restriction was contingent in nature and therefore, according to the case-law of the Court, did not prevent direct effect.

72Moreover, the requirement that the establishment concerned be duly recognised by the Member State did not preclude letter (b) from having direct effect. Once such recognition had been given in an individual case, it was sufficiently clear from that provision what economic activities were covered by the exemption from VAT.

2. Analysis

73The answer to the fourth question is also to be taken from the judgment in Kügler. Admittedly, that case concerned the direct effect of Article 13A(1)(g) of the Sixth Directive; but the basic issue is comparable in that that provision grants a tax exemption to organisations recognised as charitable by national law.

74On that point, the Court held that the exemption provided for in Article 13A(1)(g) of the Sixth Directive could be relied upon by a taxable person before national courts in order to oppose national rules incompatible with that provision.

75The Court started from the proposition that in accordance with settled case-law, 'wherever the provisions of a directive appear, so far as their subject-matter is concerned, to be unconditional and sufficiently precise, those provisions may, in the absence of implementing measures adopted within the prescribed period, be relied upon as against any national provision which is incompatible with the directive'.

76In order to establish the direct effect of Article 13A(1)(g), the Court said in particular that a Member State could not rely upon its failure to adopt the very provisions which were intended to facilitate the application of the exemption and to which the introductory part of Article 13A(1) of the Sixth Directive referred. The Court also held that Article 13A(1)(g) of the Sixth Directive 'indicates in a sufficiently precise and unconditional manner the activities to which the exemption applies'.

77The Court then considered the point that the Member State had an undoubted discretion for the purpose of according the organisations in question recognition. In that regard, it stated that as long as the Member States observed the limits of the discretion which was accorded to them by Article 13A(1)(g) of the Sixth Directive, persons could not rely on the Sixth Directive in order to acquire recognition.

78The Court held that '[i]t will accordingly be for the national authorities, in accordance with Community law and subject to review by the national courts, to determine, in the light in particular of practice followed by the competent administrative body in analogous situations, which organisations should be recognised as charitable within the meaning of Article 13A(1)(g) of the Sixth Directive'. The Court added that a Member State could grant recognition otherwise than by tax provisions. The possibility under Article 13A(2) of the Sixth Directive of making the grant of the exemptions provided for in Article 13A(1) subject to one or more conditions did not affect the conclusion that Article 13A(1) had direct effect, since that possibility was contingent in nature and a Member State could not rely on its own omission to adopt the measures necessary for laying down such conditions.

79The Court thus reached the conclusion that the exemption provided for in Article 13A(1)(g) of the Sixth Directive could be relied upon by an individual before national courts in order to oppose national rules incompatible with that provision. At the same time, the Court stated that it was for the national court to establish, in the light of all relevant factors, whether the taxable person was an organisation recognised for the purposes of the particular tax exemption.

80This reasoning also appears to be applicable to letters (b) and (c), since both tax exemptions indicate in a sufficiently precise and unconditional manner the activities to which the respective exemption applies. From the judgment in Kügler it may also be taken that neither the power of national authorities to recognise the establishments concerned for the purposes of the tax exemption nor the possibility under Article 13A(2) of making the grant of the exemptions referred to in that provision subject to certain conditions is apt to preclude the direct effect of the tax exemptions provided for in Article 13A(1).

81Accordingly, it is to be held that the e x e m p t i o ns p r o v i d ed f or in Article 13A(1)(b) and (c) of the Sixth Directive may be relied upon by a taxable person in order to oppose national rules incompatible with that provision.

V — Conclusions

82It is accordingly submitted that the Court should answer the questions referred as follows:

(1) Psychotherapeutic treatment, given in an out-patient facility by a foundation employing qualified psychologists who are licensed medical practitioners but who are not registered as doctors, qualifies as 'medical care', and therefore not as 'closely related activities' to such care, within the meaning of Article 13A(1)(b) 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. It is for the national court to establish, in the light of all relevant factors, whether the taxable person is a 'duly recognised establishment of a similar nature' within the meaning of Article 13A(1)(b) of the Sixth Directive.

(2) The exemption envisaged by Article 13A(1)(c) of the Sixth Directive 77/388/EEC is not dependent on the legal form of the taxable person supplying the medical or paramedical services referred to in that provision.

(3) The exemptions provided for in Article 13A(1)(b) and (c) of the Sixth Directive 77/388/EEC may be relied upon by a taxable person in order to oppose national rules incompatible with that provision.

Notes

(1) Original language: German.

(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 L 145, p. 1).

(3) BGBl. I 1979, p. 1953.

(4) Case C-384/98 Dv W [2000] ECR I-6795, paragraphs 17 and 18.

(5) Case C-76/99 Commission v France [2001] ECR I-249, paragraph 23.

(6) On this point, it referred to Case 353/85 Commission v United Kingdom [1988] ECR 817, paragraphs 32 and 33, according to services under letter (b) 'encompassed a whole range of medical care normally provided on a non-profitmaking basis in establishments pursuing social purposes', whereas services under letter (c) were 'provided outside hospitals and similar establishments within the framework of a confidential relationship between the patient and the person providing the care'.

(7) Cited above, footnote 5, paragraph 23.

(8) Case C-141/00 Kügler [2002] ECR I-6833, paragraph 25, with further references.

(9) Cited above, footnote 5, paragraph 25.

(10) Case C-349/96 [1999] ECR I-973, paragraph 30.

(11) Case C-2/95 SDC [1997] ECR I-3017, paragraph 20.

(12) D v W (cited above, footnote 4), paragraphs 15 ff. See also my Joint Opinion in Cases C-212/01 Unterpertinger [2003] ECR I-13859 and C-307/01 D'Ambrumenil [2003] ECR I-13989.

(13) D v W, cited above, footnote 4, paragraphs 17 and 18.

(14) Cited above, footnote 8, paragraph 36.

(15) Cited above, footnote 6, in particular paragraph 35.

(16) See Commission v France (cited above, footnote 5), paragraph 23.

(17) Cited above, footnote 8, paragraph 30.

(18) See above, paragraphs 44 f.

(19) Cited above, footnote 8, paragraph 57.

(20) Cited above, footnote 8, paragraph 58.

(21) Letter (g) concerns 'the supply of services and of goods closely linked to welfare and social security work', and the same question thus arises in its context as to recognition by authorities responsible for the provision of social security as within the context of letter (b).

(22) See above, paragraphs 44 f.

(23) Cited above, footnote 8.

(24) Cited above, footnote 8, paragraph 27.

(25) Cited above, footnote 8, paragraph 29.

(26) Cited above, footnote 8, paragraphs 29 f.

(27) In this regard, the Commission referred to Joined Cases

(231) /87 and 129/88 Ufficio distrettuale delle imposte dirette di Fiorenzuola d'Arda and Others v Comune di Carpaneto Piacentino and Another [1989] ECR 3233, paragraph 32.

(28) Cited above, footnote 8.

(29) See above, paragraph 52.

(30) Cited above, footnote 8, paragraph 51.

(31) Cited above, footnote 8, paragraph 52, under reference to Case 8/81 Becker [1982] ECR 53, paragraph 33.

(32) Cited above, footnote 8, paragraph 53.

(33) Cited above, footnote 8, in particular paragraph 58.

(34) Cited above, footnote 8, paragraph 60.