Modification of the VAT exemption for medical care

Medical care is in principle exempt from VAT in the European Union. To this end, an VAT exemption was implemented at the European level for services provided by (para)medical professionals and medical care (as well as closely related supplies of goods and services) provided by hospitals. 

In its case law, the Court of Justice of the European Union has consistenly ruled that only services which have a therapeutic aim can be exempted on the basis of the aforementioned VAT exemption. Whether or not a service has a therapeutic aim must be assessed by reference to both the factual and the legal context in which the service is performed.

In the Belgian VAT legislation and administrative guidelines, the scope of the VAT exemption for medical care is currently linked to the capacity of the service provider (qualified care providers, accredited care institutions, etc.) and the type of services (services included in the nomenclature of medical services). 

The therapeutic or non-therapeutic aim of a services is currently not the essential criterion in Belgian VAT legislation and administrative guidelines for exempting (or not) a (para)medical service from VAT. Today, for example, medical services of an aesthetic nature are already excluded from the VAT exemptions for medical care, but many other non-therapeutic services performed by (para)medical professionals and the medical institutions are still exempt from VAT.
In addition, certain healthcare providers, e.g. chiropractors and osteopaths, were principally excluded from the VAT exemption for medical care due to the fact that they belong to a non-regulated profession. 

Compared to the European legislation and the case law of the Court of Justice of the European Union, the Belgian legislator and VAT administration apply the VAT exemption for medical care too strictly and too broadly at the same time. Following the Belgian Constitutional Court's ruling No. 194/2019 of December 5, 2019, a thorough review of Belgian VAT legislation and administrative guidelines in this regard was necessary. 

Modification of VAT exemption for medical care as from January 1, 2022

In order to bring Belgian practice regarding the VAT exemption for medical care in line with European legislation as well as the case law of the Court of Justice of the European Union and the Belgian Constitutional Court, the scope of the VAT exemption for medical care in Belgium is being revised. The changes will take effect from January 1, 2022.

From now on, the VAT exemption for medical care will be limited to services relating to interventions and treatments with a therapeutic aim. This means that non-therapeutic treatments will principally no longer be able to benefit from the VAT exemption for medical care. 

In addition, the services of non-regulated (para)medical professions can also benefit from the VAT exemption – provided their qualifications are recognized by the VAT administration. More specifically, as from 1 January 2022, the VAT exemption can be claimed by, on the one hand, (para)medical care providers with a degree issued by a recognized educational institution and, on the other hand, by persons who possess the necessary qualifications to provide medical care of a sufficiently high level of quality to be comparable to the medical care provided by the aforementioned qualified (para)medical care providers, for example chiropractors and osteopaths. It goes without saying that (para)medical care can only be VAT exempt if a therapeutic aim is present.

Finally, incidental supplies of goods and services by healthcare institutions, the so-called "supplies closely related to hospital care" transactions, will only be exempt from VAT as of January 1, 2022, provided that (i) they are indispensable for the provision of the exempted medical care, or (ii) they are not primarily intended to provide the institution with additional revenue through the performance of transactions carried out in direct competition with transactions of commercial enterprises subject to VAT. These conditions are not cumulative. The establishment of one of the aforementioned circumstances is sufficient to exclude the application of the VAT exemption.Wat is de impact voor de medische sector?

What is the impact for the medical sector?

Although the scope of the VAT exemption for medical care is both broadened and limited by the aforementioned legislative amendment, in our opinion the main impact of the amendment will be felt on the side of the limitation of the VAT exemption.

Today, the Belgian administrative guidelines allow a great many services (and supplies of goods) without a therapeutic aim to fall within the scope of the VAT exemption for medical care. These include the existing directives and tolerances regarding the provision of televisions and telephones to patients, the operation of drinking and eating establishments by healthcare institutions, the operation of hospital car parks, hairdressing or manicuring services for patients, etc. 

Will the change in the scope of the VAT exemption for medical care revolutionize medical services? On a first reading of the legislative documents, the upcoming amendment indeed seems to hold a major change. However, the practical implementation of the legislative change by the VAT administration will have to provide more clarity. The Belgian VAT administration has indicated that it will publish new administrative guidelines, in principle before the new legislation enters into force on January 1, 2022.