EU Blood VAT Exemption Should Include Plasma, Says ECJ AG
European Court of Justice Advocate General Wahl has recommended that blood plasma should be exempt from value-added tax (VAT) under EU law under the current exemption for supplies of blood for the manufacture of medicinal products.
Under Article 132(1)(d) of the VAT Directive, supplies of blood for manufacturing medicinal products are exempt.
In TMD Gesellschaft für transfusionsmedizinische Dienste mbH v. Finanzamt Kassel II – Hofgeismar (Case C-412/15), the European Court of Justice has been asked by the Finance Court, Hesse, Germany, to rule on whether the supply of blood plasma for the purpose of manufacturing medicinal products is a transaction exempt from VAT.
In concluding that blood plasma should benefit from the exemption, the AG looked at how to define “blood” within the meaning of Article 132(1)(d) of the VAT Directive and, second, examined whether a distinction should be made, under that provision, between plasma intended for therapeutic purposes and that intended for the manufacture of medicinal products.
The AG said: “The exemptions in Article 132(1) of the VAT Directive are to be interpreted strictly since they constitute a departure from the general principle that VAT is to be paid on each supply of services made for consideration by a taxable person. Nevertheless, their interpretation must be consistent with the objectives underlying the exemptions, and must comply with the requirements of the principle of fiscal neutrality inherent in the common system of VAT. Accordingly, the requirement of strict interpretation does not mean that those exemptions may be construed in such a way as to deprive them of their intended effects.”
“At the outset, I observe that the VAT Directive defines neither ‘blood’ nor the other items listed in Article 132(1)(d). Nor has the Court, up to now, had the opportunity to provide guidance on those concepts.”
“As regards the supply of products and services referred to in Article 132(1)(b) and (c) of the VAT Directive, the Court has stated that the objective of their exemptions is to reduce the cost of medical care and to make that care more accessible to individuals.”
“Seen in that light, ‘blood’ cannot but encompass its components, such as plasma.”
The AG noted that “the costs of hospitals and establishments of a similar nature that use blood plasma for therapeutic purposes would obviously increase [were the exemption not granted, and, second,] whereas the use of whole blood would be exempted, the use of one or more of its components would not. Accordingly, proportionally the cost of a supply of whole blood to a patient in need of a transfusion would be lower than the cost of a transfusion involving only plasma or only platelets. That cannot, to my mind, be the outcome sought by the legislature.”
“The fact that whole blood and blood plasma are now both exempt from customs duties lends further support to the view that both should also be exempt from VAT.”
“For those reasons, I propose that the Court answer … the term ‘blood’ encompasses blood plasma obtained from human blood.”
Finally, the AG said that the exemption can benefit supplies for whatever purpose, whether for the manufacture of medicinal products or for therapeutic purposes, stating: “Article 132(1)(d) of the VAT Directive unequivocally states that, among the transactions to be exempted by the member states are ‘the supply of human organs, blood, and milk.’ That seems to imply that the supply of blood (or its components) is to be exempted from VAT regardless of the final use of the blood or the purpose of the supply.”
The AG recommended that “interpreting Article 132(1) of the VAT Directive as encompassing blood plasma regardless of its intended use is also more in line with the principle of fiscal neutrality, according to which economic operators carrying out the same transactions must not be treated differently in relation to the levying of VAT.”