Acquisition of assets required by law does not automatically establish a direct link with taxable economic activity
Case C-513/24 – Oblastní nemocnice Kolín
The fact that a hospital, which also provides taxable services, is required to acquire certain equipment in order to obtain an operating licence does not automatically entitle it to a partial right of deduction. For each acquisition, it must be examined how the relevant asset or service is actually used.
The applicant in the case operates a hospital in the Czech Republic. The hospital primarily provides VAT-exempt healthcare services; however, it also carries out taxable activities such as clinical trials, accommodation for accompanying persons, professional training for doctors, disinfection services, and prenatal courses. In determining the deductible VAT relating to the acquisition of assets, the applicant applied an apportionment method in respect of all technical equipment and tangible assets that could not be directly attributed to either taxable or exempt activities, but which had to be acquired in order to obtain an operating licence pursuant to legal requirements. The Czech tax authority, supported by the Prague Regional Court, held that the costs of assets acquired solely due to statutory obligations could not be regarded as part of the general overheads incorporated into the price of taxable services. Accordingly, the applicant was not entitled to deduct VAT, even partially, in respect of such costs.
In its judgment, the CJEU confirmed that the mere existence of a statutory obligation to acquire an asset does not automatically establish a direct and immediate link between that acquisition and an economic activity giving rise to a right of deduction. Instead, such a link must be assessed on an objective basis, taking into account the intended use of the asset. It must be determined whether the acquisition can be directly attributed to either taxable or exempt activities, and, in the case of mixed use, the proportion attributable to activities giving rise to a right of deduction must be established. This assessment must be carried out individually for each asset.The Court further noted that the right to deduct VAT is not automatically excluded where the asset is not actually used. According to established case-law of the Court, the right to deduct VAT arising at the time of acquisition is retained even if the intended economic activity is ultimately not carried out, or where the taxable person is unable to use the asset for taxable transactions due to circumstances beyond its control.
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