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    VAT on use of personnel in healthcare?

    There are various VAT exemptions applicable to the healthcare sector, including what is referred to as the VAT-hospital exemption, the VAT-care exemption and the social and cultural VAT exemption. The Court of Justice of the EU (CJEU) recently ruled that a temporary employment agency that provides qualified healthcare personnel to healthcare institutions does not fall under the so-called social and cultural VAT exemption (section 11 (1) (f) of the Dutch Turnover Tax Act 1968). This also applies for qualified healthcare personnel who provide their services directly to care users.

    Dutch situation

    The Supreme Court in the Netherlands gave its view on these situations last year. In the event a qualified nurse performs work as a nurse anaesthetist in and for a hospital, as a self-employed worker without employees and therefore on the basis of a contract for services, this work is exempt from VAT under the VAT-healthcare exemption, according to the Supreme Court (section 11 (1) (g) (1°) (a) of the Dutch Turnover Tax Act 1968). If a partnership of surgical assistants and assistant anaesthetists performs work for a hospital, this work can also be exempt from VAT based on the VAT-healthcare exemption, provided the work is, by its nature, an essential, inherent and inseparable part of the medical care provided to patients. In these kinds of cases, therefore, no healthcare personnel are being provided or seconded to a healthcare institution (as is the case in the CJEU judgment).

    In response to these two Supreme Court judgments, the State Secretary for Finance confirmed in a letter on 9 July 2014 that from the date of the decisions (13 June 2014), self-employed workers without employees and partnerships are exempt from VAT for all work that falls within the performance of work activities as an individual professional practitioner under the Individual Health Care Professions Act or within the performance of health services, which by their nature are an essential, inherent and inseparable part of the exempt medical care provided to patients by hospitals. A condition is that there may not be a secondment agreement, an employment relationship with those who perform the work at the hospital, or any other legal tie between the partnership and/or the partners or employees of the partnership which nonetheless gives rise to a relationship of subordination with respect to the hospital, in relation to terms and conditions of employment and remuneration. In the same letter the State Secretary for Finance stressed that temporary employment agencies that second medical personnel in exchange for compensation do not fall under a VAT exemption and that VAT is therefore owed on the temporary secondment of personnel (which is in line with the outcome of the CJEU judgment).

    In view of the two Supreme Court judgments and the Secretary for Finance's confirmation, the CJEU's decision is not expected to have an impact on daily practice in the Netherlands.

    For more information, please contact Arianne Broekman or Danielle Westerhoff.

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