EC Refers Netherlands To Court Of Justice Over VAT Exemption

by Ulrika Lomas, Tax-News.com, Brussels

28 November 2008

The European Commission has announced that it has decided to refer the Netherlands to the European Court of Justice for applying a value-added tax (VAT) exemption to the provision of personnel.

The VAT directive exempts certain supplies of goods and services in the socio-cultural, health and the education sector.

In order to respect the neutrality of the VAT system and avoid unfair competition in the internal market, the Court of Justice has made clear on several occasions that the exemptions in the VAT Directive are to be strictly interpreted.

The Commission is of the opinion that the Netherlands applies these exemptions too widely by also exempting the provision of personnel in these areas.

In addition, the Netherlands does not consider public corporate bodies providing personnel to EU regions to be VAT taxable persons. Therefore, services supplied by them are not subject to VAT.

The Commission is of the opinion that these public corporate bodies do act like private bodies (like, for instance, job agencies) when they provide personnel, and should therefore qualify as taxable persons, subject to VAT.

The Commission sent a reasoned opinion to the Netherlands in June, but as the Netherlands has not amended its legislation within the time limit laid down, it has decided to refer the matter to the Court of Justice.

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