Case C-172/03

Wolfgang Heiser

v

Finanzamt Innsbruck

(Reference for a preliminary ruling from the

Verwaltungsgerichtshof (Austria))

(VAT – Exemption for medical care provided in the exercise of the profession of medical practitioner – Adjustment of deductions)

Opinion of Advocate General Tizzano delivered on 28 October 2004

Judgment of the Court (Second Chamber), 3 March 2005

Summary of the Judgment

1. State aid – Definition – Effect on trade between Member States – Selective nature of measure – Justification by the nature or general scheme of the system – Effect on competition

(EC Treaty, Art. 92(1) (now, after amendment, Art. 87(1)EC))

2. State aid – Definition – Measure with a social purpose – Derogation provided for by Article 90(2) of the Treaty (now, after amendment, Article 86(2) EC) – State measures seeking to approximate the conditions of competition in a particular sector of the economy to those prevailing in other Member States – No effect on the classification as aid

(EC Treaty, Art. 90(2) and 93(3) (now Art. 86(2) EC and 88(3) EC) and Art. 92(1) (now, after amendment, Art. 87(1) EC))

3. State aid – Definition – Discontinuance, in the case of the changeover for medical practitioners from taxable to exempt status for the purposes of value added tax, of the reduction of input tax already deducted that is prescribed by Article 20 of the Sixth Directive in relation to goods that continue to be used in the business – Included

(EC Treaty, Art. 92(1) (now, after amendment, Art. 87(1) EC); Council Directive 77/388, Art. 20)

1. Article 92(1) of the Treaty (now, after amendment, Article 87(1) EC) lays down the following conditions for a measure to be classified as State aid. First, there must be an intervention by the State or through State resources. Second, the intervention must be liable to affect trade between Member States. Third, it must confer an advantage on the recipient. Fourth, it must distort or threaten to distort competition.

As regards the second condition, there is no threshold or percentage below which it may be considered that trade between Member States is not affected. The relatively small amount of aid or the relatively small size of the undertaking which receives it does not as such exclude the possibility that trade between Member States might be affected. Fulfilment of the second condition does not therefore depend on the local or regional character of the services supplied or on the scale of the field of activity concerned.

As regards the third condition, it is settled case-law that the concept of aid embraces not only positive benefits, but also measures which, in various forms, mitigate the charges which are normally included in the budget of an undertaking and which, without therefore being subsidies in the strict meaning of the word, are similar in character and have the same effect. In that regard, Article 92(1) of the Treaty requires it to be determined whether, under a particular statutory scheme, a State measure is such as to favour ‘certain undertakings or the production of certain goods’ in comparison with others which, in the light of the objective pursued by the system in question, are in a comparable legal and factual situation. If it is, the measure concerned fulfils the condition of selectivity which is a defining characteristic of the concept of State aid. The fact that the number of undertakings able to claim entitlement under the measure at issue is very large, or that they belong to different sectors of activity, is not sufficient to call into question its selective nature and therefore, to rule out its classification as State aid. Similarly, aid may concern a whole economic sector and still be covered by Article 92(1) of the Treaty. That would not be the case if a measure, although conferring an advantage on its recipient, were justified by the nature or general scheme of the system of which it is part.

As regards the fourth condition, aid which is intended to release an undertaking from costs which it would normally have had to bear in its day-to-day management or normal activities, distorts the conditions of competition.

(see paras 27, 32-33, 36, 40, 42-43, 55)

2. The mere fact that a measure has a social purpose does not suffice to exclude the measure at issue outright from classification as aid within the meaning of Article 92 of the Treaty (now, after amendment, Article 87 EC). Article 92(1) does not distinguish between measures of State intervention by reference to their causes or their aims but defines them in relation to their effects. Moreover, the derogation provided for by Article 90(2) of the Treaty (now Article 86(2) EC) does not prevent a measure from being classified as State aid within the meaning of Article 92 thereof. Nor could it, once such a classification has been made, allow the Member State concerned not to notify the measure pursuant to Article 93(3) of the Treaty (now Article 88(3) EC). Finally, the fact that a Member State seeks to approximate, by unilateral measures, the conditions of competition in a particular sector of the economy to those prevailing in other Member States cannot deprive the measures in question of their character as aid.

(see paras 46, 51, 54)

3. Article 92 of the Treaty (now, after amendment, Article 87 EC) must be interpreted as meaning that a rule providing that the changeover for medical practitioners from taxable to exempt status for the purposes of VAT does not, in relation to goods that continue to be used in the business, entail the reduction of input tax already deducted that is prescribed by Article 20 of the Sixth Directive must be classified as State aid.

(see para. 59)