On October 20, 2016 on the website of the Court of Justice of the European Union (CJEU) the opinion of Advocate General Mengozzi in Case C‑573/15, État belge versus Oxycure Belgium SA (ECLI:EU:C:2016:792) was published.
Having regard to the principle of fiscal neutrality, is a Member State permitted to apply value added tax (VAT) to the sale and/or hire of oxygen concentrators at the standard rate of 21% when it applies a reduced rate of 6% to the sale of medical oxygen cylinders?
This is, in essence, the question referred to the Court for a preliminary ruling by the Cour d’appel de Liège (Court of Appeal, Liège, Belgium), which concerns the interpretation of Article 98(1) and (2) of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax, as amended by Council Directive 2006/138/EC of 19 December 2006 (‘the VAT Directive’), Annex III, points 3 and 4, of that directive and the principle of fiscal neutrality.
This request has been made in a dispute between the État belge (BelgianState) and Oxycure Belgium SA (‘Oxycure’) regarding liability to VAT for the activity of sale and/or hire of oxygen concentrators and accessories for oxygen therapy.
Oxygen concentrators are appliances for medical use which run on electricity and operate on the principle of concentrating oxygen in the ambient air in order to extract nitrogen from it, thereby offering a higher oxygen concentration. Appliances of this kind comprise a part whose purpose is to concentrate the oxygen and a nasal cannula or oxygen mask and an oxygen intake hose, which form an integral part of the appliance. Oxygen concentrators allow home-based oxygen therapy for patients suffering from a respiratory insufficiency or other serious impairment requiring oxygen treatment whose condition can no longer be improved by the use of aerosols and bronchodilators.
In the main proceedings the file shows that between 1 October 2007 and 31 March 2010 Oxycure applied to the hire and sale of oxygen concentrators and their accessories a reduced rate of VAT of 6%, which the Kingdom of Belgium decided to levy on the supply and/or hire of certain medical equipment, articles or appliances in accordance with Article 98(2) and Annex III to the VAT Directive. However, according to the Belgian tax authorities, Oxycure’s transactions should have been subject to the application of the standard rate of 21% pursuant to Royal Decree No 20 of 20 July 1970 setting the rates of value added tax and establishing the distribution of goods and services under those rates. The Belgian tax authorities therefore sent Oxycure a demand for payment claiming almost EUR 1 300 000 in VAT and imposing a fine corresponding to 10% of the amount claimed.
By judgment of 25 April 2013, the Tribunal de première instance de Namur (Court of First Instance, Namur, Belgium) granted the action brought by Oxycure against the decision of the Belgian tax authorities, which it reversed. In essence, according to that judgment, oxygen concentrators satisfy the definition in section XXIII, with the title ‘Miscellaneous’, point 2 of table A of Royal Decree No 20, applicable to ‘other appliances which are worn or carried, or implanted in the body, to compensate for a defect or disability’, thus permitting transactions relating to the sale and/or hire of such appliances to benefit from the reduced rate of 6%.
The Belgian State appealed against that judgment at the referring court.
The referring court finds that oxygen concentrators are, along with medical oxygen cylinders and medical liquid oxygen tanks, one of three sources of oxygen available on the market and that those sources are all interchangeable and/or complementary. First, the court refers to a report by the Centre fédéral d’expertise des soins de santé (Belgian Health Care Knowledge Centre), according to which each source is available in a large fixed model and a small portable model. The referring court notes that the report also states that, from the point of view of clinical efficiency for the patient, all oxygen treatments are equivalent, regardless of whether the oxygen is supplied by one or other of the three sources, whether it is fixed or portable, while the differences between these methods of administration of oxygen relate to convenience issues (noise, use away from home, available volume, filling of portable model by the patient) and to the cost to society. Second, the referring court observes that the Belgian rules on compulsory health insurance schemes and claims acknowledge the complete interchangeability of these sources of oxygen, given that an emergency oxygen cylinder is included in the reimbursable cost of the oxygen concentrator.
In these circumstances, the referring court asks whether, even assuming that no section of table A of Royal Decree No 20 refers explicitly to oxygen concentrators, that table must all the same be interpreted, in the light of the principles of EU law, and in particular the principle of fiscal neutrality, to the effect that the table in question applies, at least implicitly, to these appliances in the same way as to the other sources of oxygenation.
The answer to this question being a matter of interpretation of EU law, the referring court decided to stay its proceedings and to refer the following question to the Court for a preliminary ruling:
‘Does Article 98(1) and (2) of the VAT Directive, read in conjunction with Annex III, points 3 and 4, of the VAT Directive, having regard to, in particular, the principle of neutrality, preclude a national provision which prescribes a reduced rate of VAT for oxygen treatment by means of oxygen cylinders, whereas oxygen treatment by means of an oxygen concentrator is subject to the standard rate of VAT?
That question was the subject of written observations submitted by Oxycure, the Kingdom of Belgium and the European Commission. Those interested parties also presented oral argument and their answers to the questions put by the Court at the hearing held on 19 September 2016.
Conclusion
The Advocate General propose that the Court answer the question referred for a preliminary ruling by the Cour d’appel de Liège (Court of Appeal, Liège, Belgium) as follows:
Article 98(1) and (2) of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax, as amended by Council Directive 2006/138/EC of 19 December 2006, and Annex III, points 3 and 4, of that directive do not preclude a national provision by which a reduced rate of value added tax is not applied to the supply and/or hire of oxygen concentrators like those at issue in the main proceedings, inasmuch as those appliances neither constitute pharmaceutical products within the meaning of Annex III, point 3, of Directive 2006/112, as amended, nor are for the exclusive use of the disabled within the meaning of point 4 of that annex, which it is for the referring court to ascertain.
The principle of fiscal neutrality may not be interpreted as authorising the thwarting of the respective ambits of the categories set out in Annex III, points 3 and 4, of Directive 2006/112, as amended, by granting a reduced rate of value added tax for the supply and/or hire of devices that do not satisfy the definitions laid down in those points.
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