WRITTEN QUESTION E-0801/00

by Michel Hansenne (PPE-DE) to the Commission

(16 March 2000)

Subject: Services provided to French public hospitals

When a research establishment subject to VAT in Belgium provides services listed in Article 9(2)(e) of Directive 77/388/EEC(1) to a French public hospital, which of them is liable to pay VAT on the services in question and in which country?

Would the position be the same if identical services were supplied by the same provider to a hospital established, for example, in the United Kingdom or in another Member State that has not exercised the option provided by Article 4(5), last paragraph, of Directive 77/388/EEC?

Has the Commission provided the national administrations and economic operators with a comprehensive list allowing them to determine in which cases VAT is payable when a State has exercised the option provided by Article 4(5), last paragraph, of Directive 77/388/EEC? Does it consider that it is up to the national administrations and economic operators themselves to find out about the legislation in the country of the person to whom services are supplied in order to determine whether or not VAT is payable in the country of the service provider? Does it not consider that there is a risk that failure to distribute certain information on implementation of the Sixth VAT Directive may lead to cases of non-taxation due to ignorance on the part of taxable persons and the civil servants responsible for regulating them?

(1) OJ L 145, 13.6.1977, p. 1.

Answer given by Mr Bolkestein on behalf of the Commission

(26 April 2000)

Article 4(5) of the 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, provides that Member States may regard the activities of bodies exempt under Articles 13 or 28 as the activities of public authorities.

When exercising this option, a Member State may decide to regard activities which, according to the general principles, fall within the scope of VAT but are exempt under Article 13 (such as hospitalisation and medical care provided by bodies governed by public law) as being outside the scope of VAT. In neither case is VAT due on the services concerned.

However, as the Honourable Member rightly remarks, this option affects the decision on where certain expenditure incurred by such bodies should be taxed. Thus research services supplied by a taxable person to a public hospital are to be taxed either in the Member State in which the public hospital is established (under the general principles) or in the Member State in which the service provider is established (if the Member State in which the public hospital is established has exercised the option outlined above).

Under the current VAT system, there are several cases in which the status of the client determines where the transaction is to be taxed. In such cases, it is up to the supplier to find out what the customer's status is.

The Member States have adequate Community instruments available to them to monitor such transactions. Council Directive 77/799/EEC of 19 December 1977 concerning mutual assistance by the competent authorities of the Member States in the field of direct taxation lays down common rules for exchanges of information between Member States(1). Moreover, the Commission has a standing committee on administrative cooperation, which provides representatives of the national administrations with a forum for discussion of matters relating to such cooperation.

The system for taxing public authorities, and the scope of the exemptions for certain activities of public interest, are matters which the Commission intends to review as part of the exercise to modernise the current VAT system to ensure greater uniformity in the way that it is applied.

(1) OJ L 336, 27.12.1977.