Hospice: exempt care or taxed short stay?
The Court of Appeal in The Hague and the District Court of Gelderland reached opposite conclusions in comparable cases on the VAT position of a hospice. The Supreme Court must now provide clarity.
A hospice takes in and cares for terminally ill people with a life expectancy of no more than three months, until they die. Caring for and nursing people admitted to an institution, and closely related activities, are exempt from VAT. Whether a hospice's services fall within that provision turns out not to have a straightforward answer.
The scope of the exemption
The scope of the exemption for residential care is worked out in Dutch policy. Services that are taxable in themselves share in the exemption where they are an essential, inherent and inseparable part of the therapeutic medical treatment provided by an institution. A service is only essential, inherent and inseparable where it forms part of a course of treatment in which one stage cannot succeed without the other. Whether the services are supplied by a medical practitioner is irrelevant.
Two opposing rulings
Early last year the Court of Appeal in The Hague ruled on whether a hospice could deduct the VAT on its construction costs. The operator took the view that it made taxable supplies by providing accommodation and refreshments for short stays in return for payment. Because of the exception to the letting exemption, those supplies would then be taxable and the VAT on the construction costs deductible.
The court did not accept that reasoning. The hospice's supply does not fall within the temporary letting of guest rooms covered by that exception, because its essential character lies not in the letting but in the combination with caring for and nursing a terminally ill person. The exemption for residential care therefore applies.
At the end of 2023 the District Court of Gelderland reasoned the opposite way in a comparable case involving a different hospice. That operator could deduct the input VAT on the construction costs, because in the court's view the hospice supplied no medical services. That a complete package was offered to relieve guests of practical concerns did not mean there was medical care: that was provided by the guest's own GP and by the home care organisation. Because the guest was responsible for coordinating that care, the medical exemption did not apply to the hospice's supplies.
Our comment
The facts of the two cases differ, but what they have in common is that both organisations present themselves as low-care hospices. In such a hospice, sometimes called an almost-at-home house, care is contracted out to home care organisations and volunteers act only as hosts, without carrying out care tasks.
We question whether it is right to treat such low-care hospices as care institutions when they provide no care themselves. An appeal has been lodged against the Court of Appeal's ruling. It is now for the Supreme Court to provide the clarity needed.