C-513/24

Provisional text OPINION OF ADVOCATE GENERAL RANTOS delivered on 25 September 2025 (1) Case C‑513/24 Oblastní nemocnice Kolín, a. s., nemocnice Středočeského kraje v Odvolací finanční ředitelství (Request for a preliminary ruling from the Nejvyšší správní soud (Supreme Administrative Court, Czech Republic)) ( Reference for a preliminary ruling – Harmonisation of fiscal legislation – Directive 2006/112/EC – Common system of value added tax (VAT) – Right to deduct VAT – Article 173(1) – Proportional deduction – Concept of ‘general costs’ – Minimum technical and material equipment of healthcare facilities required in order to obtain a licence to supply healthcare services in respect of which VAT is not deductible, but which are necessary for the supply of services in respect of which VAT is deductible )  Introduction 1.        This request for a preliminary ruling from the Nejvyšší správní soud (Supreme Administrative Court, Czech Republic) concerns, in essence, the interpretation of Article 173(1) of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax (‘the VAT Directive’). (2) 2.        The request has been made in proceedings between Oblastní nemocnice Kolín, a. s., nemocnice Středočeského kraje (Oblastní nemocnice Kolín, a. s., a hospital in the region of Central Bohemia, Czech Republic) (‘the appellant in the main proceedings’) and the Odvolací finanční ředitelství (Appellate Tax Directorate, Czech Republic) (‘the Tax Directorate’) concerning the right to deduct VAT in respect of services in the healthcare field. 3.        More specifically, the referring court asks whether, in the context of transactions in respect of which input VAT is deductible, a taxable person may deduct a proportion of the VAT charged on the acquisition of goods and services which, under the applicable national legislation, constitute the minimum equipment required in order to obtain a licence to supply services in respect of which VAT is not deductible (namely healthcare services), a supply that is also necessary for the provision of services in respect of which VAT is deductible.  Legal context  European Union law 4.        Article 132(1)(b) of the VAT Directive states: ‘Member States shall exempt the following transactions: … (b)      hospital and medical care and closely related activities undertaken by bodies governed by public law or, under social conditions comparable with those applicable to bodies governed by public law, by hospitals, centres for medical treatment or diagnosis and other duly recognised establishments of a similar nature’. 5.        Article 168(a) of that directive provides: ‘In so far as the goods and services are used for the purposes of the taxed transactions of a taxable person, the taxable person shall be entitled, in the Member State in which he carries out these transactions, to deduct the following from the VAT which he is liable to pay: (a)      the VAT due or paid in that Member State in respect of supplies to him of goods or services, carried out or to be carried out by another taxable person’. 6.        Under Article 173(1) of that directive: ‘In the case of goods or services used by a taxable person both for transactions in respect of which VAT is deductible pursuant to Articles 168, 169 and 170, and for transactions in respect of which VAT is not deductible, only such proportion of the VAT as is attributable to the former transactions shall be deductible. The deductible proportion shall be determined, in accordance with Articles 174 and 175, for all the transactions carried out by the taxable person.’  Czech legislation 7.        Paragraph 1(1) of vyhláška č. 92/2012 Sb., o požadavcích na minimální technické a věcné vybavení zdravotnických zařízení a kontaktních pracovišť domácí péče (Decree No 92/2012 on the requirements relating to minimum technical and material equipment of healthcare facilities and home care contact points) of 15 March 2012 (‘Decree No 92/2012’), (3) in force at the time of the facts in the main proceedings, states, in essence, that the general requirements relating to the minimum technical and material equipment (‘the technical and material equipment’) of healthcare facilities are set out in the annex to that order. 8.        Paragraph 2(1) of that decree is worded as follows: ‘A healthcare facility in which a healthcare service provider (“the provider”) is licensed to supply healthcare services on the date of entry into force of this Decree must be technically and materially equipped in accordance with this Decree. …’ 9.        The annexes to that decree list several hundred items of technical and material equipment which different types of healthcare facilities must have. Those items include requirements relating to premises (consultation rooms, waiting rooms, toilets for patients, storage areas), equipment for such premises (armchairs, washbasins, cabinets, chairs, desks), instruments (stethoscopes, magnifying glasses), basic equipment (tonometers, scales, glucometers) and more sophisticated equipment (ECG devices, ultrasound scanners, laryngostroboscopes, vital signs monitors).  The dispute in the main proceedings, the question referred for a preliminary ruling and the procedure before the Court 10.      The appellant in the main proceedings is a hospital located in the Czech Republic. Its main economic activity is the supply of healthcare services in respect of which VAT is not deductible (‘healthcare services’), but it also supplies other services in respect of which VAT is deductible (‘additional services’). (4) Under the applicable national legislation (namely Decree No 92/2012), in order to be able to supply healthcare services, the appellant in the main proceedings must be licensed for each particular healthcare area and, in order to obtain that licence, it must ensure that it has a minimum level of equipment. 11.      On 18 January 2019, the appellant in the main proceedings filed a supplementary tax return for December 2016, in which it exercised its right to a partial (proportional) deduction of VAT in the total amount of 4 176 327 Czech koruny (CZK) (approximately EUR 164 500). On 5 February 2021, the tax authorities issued a tax adjustment notice in which they accepted part of the deduction sought but excluded from that deduction the amount of CZK 3 287 723 (approximately EUR 129 500), which corresponds to services for the provision of healthcare. 12.      After objecting to that tax adjustment notice, an objection that was upheld in part by decision of the Tax Directorate, and following an action brought against that decision, which was dismissed by the Krajský soud v Praze (Regional Court, Prague, Czech Republic), (5) the appellant in the main proceedings lodged an appeal on a point of law before the Nejvyšší správní soud (Supreme Administrative Court), which decided to stay the proceedings and to refer the following question to the Court of Justice for a preliminary ruling: ‘Must Article 173(1) of [the VAT Directive] be interpreted as meaning that, where a transaction in respect of which VAT is deductible depends on the possession of a licence to carry out transactions in respect of which VAT is not deductible (in this case, health services), do the goods and the services relating thereto, which constitute, under national legislation, the minimum technical and material equipment for healthcare facilities, on which the provision of healthcare services depends, correspond to general (overhead) costs directly and immediately linked to the overall economic activity of the taxable person, and hence, give rise to a right to deduct a proportion of the tax?’ 13.      Written observations were submitted to the Court by the appellant in the main proceedings, the Czech Government and the European Commission. Those parties, together with the Tax Directorate, also presented oral argument at the hearing held on 12 June 2025.  Analysis 14.      By the question it submits for a preliminary ruling, the referring court asks the Court of Justice, in essence, whether, in the context of transactions in respect of which input VAT is deductible, a taxable person may deduct a proportion of the VAT charged on the acquisition of goods and services which, under the applicable national legislation, constitute the minimum equipment required in order to obtain a licence to supply services in respect of which VAT is not deductible (namely healthcare services), a supply that is also necessary for the provision of services in respect of which VAT is deductible (namely additional services). 15.      As regards goods and services supplied in order to perform both transactions in respect of which VAT is deductible and transactions in respect of which VAT is not deductible, Article 173(1) of the VAT Directive essentially provides that only such proportion of the VAT as is attributable to the former transactions is to be deductible and that the deductible proportion is to be determined for all the economic transactions carried out by the taxable person, following the methodology set out in Articles 174 and 175 of that directive. 16.      The Court has consistently held that, in order for a right to deduct (6) to be conferred on a taxable person, (7) the existence of a direct and immediate link between a particular input transaction and an output transaction or transactions giving rise to the right to deduct is, in principle, necessary. The right to deduct VAT charged on the acquisition of input goods or services presupposes that the expenditure incurred in acquiring them is a component of the price of the output transactions giving rise to the right to deduct. (8) 17.      However, a taxable person also has a right to deduct even where there is no direct and immediate link between a particular input transaction and an output transaction or transactions giving rise to the right to deduct, where the costs of the goods and services in question are part of that taxable person’s general costs and are, as such, components of the price of the goods or services which that taxable person supplies. Such costs do have a direct and immediate link with the taxable person’s economic activity as a whole. (9) On the other hand, where goods or services acquired by a taxable person are used for the purposes of transactions that are exempt or do not fall within the scope of VAT, no output tax can be collected or input tax deducted. (10) 18.      Therefore, whether there is a right to deduct is determined by the nature of the output transactions to which the input transactions are assigned (11) and, where the taxable person’s economic activity consists of both taxed transactions and VAT-exempt transactions, the deduction scheme provided for in Article 173(1) of the VAT Directive should be applied to that person’s general costs. (12) 19.      The Court has further specified that the existence of links between transactions must be assessed in the light of the objective content of those transactions. More specifically, it is necessary to consider all the circumstances surrounding the transactions concerned and to take account only of the transactions which are objectively linked to the taxable person’s taxable activity. To that effect, account must be taken of the actual use of the goods and services acquired by the taxable person and of the exclusive reason for the transaction in question, since that reason must be regarded as a criterion for determining the objective content. (13) 20.      In that regard, the existence of a statutory obligation to purchase goods or services has not, in itself, been regarded by the Court as a decisive or relevant factor when assessing whether there is a direct and immediate link between that purchase and the output transactions in respect of which input VAT is deductible or the taxable person’s economic activity as a whole. For example, in its judgment in Portugal Telecom, (14) the Court held that the right to deduct all the input VAT paid could not be limited simply because national legislation treats the taxed transactions as ancillary to the main activity, (15) while, in its judgment in Becker, (16) the Court held that the fact that domestic civil law obliges an undertaking to bear the costs relating to the defence, in criminal proceedings, of its representatives’ interests is not relevant to the classification of transactions relating to that defence. (17) It is true that, in its judgment in PPG Holdings, (18) the Court, when examining the possibility of deducting the costs of purchasing services provided in order to ensure the operation of a pension fund, mentioned the existence of a legal obligation requiring the holding undertaking subject to tax to set up that pension fund for its undertakings’ employees. However, it seems to me that that legal obligation did not play a decisive role in the assessment of the Court, which made it clear that such costs were deductible in so far as they formed part of the general costs of the undertaking in question. (19) 21.      In the present case, under the national legislation at issue in the main proceedings, first, in order to obtain a licence to supply healthcare services, facilities must meet minimum technical and material requirements, entailing the acquisition, repair, review and maintenance of the equipment necessary for that purpose, (20) and, secondly, in order to be able to provide additional services, those facilities must satisfy the conditions laid down for the provision of healthcare services. 22.      Therefore, it is for the referring court to ascertain, in accordance with the case-law of the Court recalled in points 16 and 17 of this Opinion, whether, in the absence of a direct and immediate link between the input services acquired and the output transactions in respect of which VAT is deductible, the former are part of the general costs of the appellant in the main proceedings, with the result that they must be regarded as components of the price of the goods or services which it supplies. That said, in order for the referring court to be able to give a final ruling on that matter by conducting an assessment of the facts in the main proceedings, it is for the Court of Justice to provide it with useful guidance in that regard. 23.      As a preliminary point, I note that the link which the referring court draws attention to in its order for reference is not a commercial link between the input and output transactions, but a legal link, namely the obligation, which the national legislation at issue imposes on the appellant in those proceedings, to acquire certain goods and services in order to be able to provide healthcare services and, indirectly, additional services. 24.      In that regard, I consider that the mere existence of a statutory purchase obligation is not sufficient to be able to establish a direct and immediate link with the taxable person’s economic activity as a whole, having regard to the case-law of the Court, according to which that link must be assessed in the light of the objective content of the transactions in question. (21) 25.      However, the national legislation at issue in the main proceedings is one factor, among others, to be taken into account when assessing that direct and immediate link, so that the costs of purchasing the goods and services concerned – which are required under that legislation in order to obtain a licence to supply healthcare services – could be regarded as being assigned to those services. In the circumstances of the present case, what matters is not so much the existence of a statutory obligation, but rather the fact that, under the relevant legislation, the goods and services concerned are acquired in order to be assigned to the provision of healthcare services. (22) 26.      That finding also applies where – as the appellant in the main proceedings submits and subject to verification by the referring court – some non-exempt services it supplies, although subject to VAT, are classified as healthcare services and thus fall within the scope of the statutory obligation in question. In those circumstances, the costs of purchasing the goods and services at issue may be apportioned between, on the one hand, the exempted healthcare services and, on the other, the healthcare services subject to VAT and deducted on a proportional basis. (23) 27.      By contrast, the same cannot be said as regards additional services. Even assuming that the provision of healthcare services is necessary in order to be able to supply those additional services, I note that, in so far as the obligation imposed by the national legislation at issue in the main proceedings appears to be designed solely with a view to the supply of healthcare services and not additional services, it cannot be presumed that the goods and services which are required to be purchased are assigned to the provision of additional services. The link between, on the one hand, the input goods and services and, on the other, the provision of additional services as outputs is not sufficiently direct and immediate, which means that the expenditure incurred in acquiring those goods and services cannot be treated as general costs simply because their acquisition is required under that national legislation. (24) 28.      In any event, the fact that the statutory obligation does not serve automatically to establish a direct and immediate link between the input transactions required under the national legislation at issue in the main proceedings and the output transactions in respect of which VAT is deductible does not prevent the existence of such a link from being demonstrated, on a case-by-case basis, in accordance with the principles set out in the case-law of the Court cited in points 16 to 20 of this Opinion. In so far as some of the goods and services at issue are also necessary for the supply of additional services, their acquisition has a direct and immediate link with those activities, which means that the right to deduct may be attributed to those activities on a proportional basis. In that regard, I consider that the decisive factor in order for the output transactions to give rise to a right to deduct in proportion to the input transactions is, contrary to what the referring court appears to suggest, not the actual or regular use of the input goods and services, but rather the possibility of such use. (25) 29.      The merits of the foregoing analysis seem to me to be even clearer if account is taken of the example, mentioned by the referring court, of the purchase of a defibrillator as a compulsory item of equipment for use in an intensive care unit (and thus for the provision of healthcare services). 30.      First, it is highly unlikely that a defibrillator could be regarded as an item linked to the economic activity as a whole of the appellant in the main proceedings. The link between the purchase of that item of equipment and certain output services, such as the carrying out of clinical studies or the provision of internships for trainee doctors (additional services), is not self-evident. That link cannot therefore be presumed for services which do not in any way require the use of a defibrillator and whose only connection with the purchase of that device is limited to the fact that they may be supplied only in conjunction with an activity which may require the use of such a device. 31.      Secondly, it is conceivable that a defibrillator may be used in medical procedures subject to VAT, as in the case of gynaecological healthcare services under general anaesthetic to which the appellant in the main proceedings refers in its written observations. In those circumstances, although that equipment is intended to be used more regularly by the intensive care unit than by the gynaecology department, it might nevertheless be needed by that department, as equipment which may be used if and where necessary, so that there is a link between its acquisition and the activity pursued. (26) As is apparent in particular from the judgment in Iberdrola Inmobiliaria Real Estate Investments, (27) a link between input and output transactions need not be exclusive and may relate to input activities which also benefit other output transactions or other persons. (28) 32.      In short, my view is that Article 173(1) of the VAT Directive must be interpreted as meaning that the costs incurred by a taxable person in connection with the acquisition of goods or services which, under the applicable national legislation, constitute the minimum technical and material equipment required for the pursuit of activities in respect of which VAT is not deductible (in the present case, healthcare services) do not, for that reason alone, correspond to general costs which have a direct and immediate link with that taxable person’s economic activity as a whole and therefore give rise to a right to a proportional deduction of VAT, including for the performance of a transaction in respect of which VAT is deductible that depends on the possession of a licence to engage in activities in respect of which VAT is not deductible, unless it is shown that those goods and services have a direct and immediate link with that taxable person’s economic activity as a whole.  Conclusion 33.      In the light of the foregoing considerations, I propose that the Court answer the question referred for a preliminary ruling by the Nejvyšší správní soud (Supreme Administrative Court, Czech Republic)) as follows: Article 173(1) of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax, must be interpreted as meaning that the costs incurred by a taxable person in connection with the acquisition of goods or services which, under the applicable national legislation, constitute the minimum technical and material equipment required for the pursuit of activities in respect of which value added tax (VAT) is not deductible (in the present case, healthcare services) do not, for that reason alone, correspond to general costs which have a direct and immediate link with that taxable person’s economic activity as a whole and therefore give rise to a right to a proportional deduction of VAT, including for the performance of a transaction in respect of which VAT is deductible that depends on the possession of a licence to engage in activities in respect of which VAT is not deductible, unless it is shown that those goods and services have a direct and immediate link with that taxable person’s economic activity as a whole. 1      Original language: French. 2      OJ 2006 L 347, p. 1. 3      36/2012 Sb. 4      Those services include clinical studies on the effects of medicinal products, accommodation for persons accompanying patients, extra services for hospitalised patients, medical internships, instrument sterilisation services for third parties, and radiographic, ultrasound and veterinary examinations. The appellant in the main proceedings stated in its written observations that its activities should instead be divided into three categories: (i) healthcare services aimed at protecting health (exempt from VAT); (ii) healthcare services with an aim other than that of protecting health (subject to VAT); and (iii) other services. 5      That court dismissed the action on the ground that general costs could not be regarded as covering the costs of all the material and technical equipment which hospitals must have in order to ensure that they can function and provide their full range of services (healthcare and taxable services), but only costs which ensure the normal functioning of the hospital at issue in the main proceedings and which, at least to a certain extent, were actually incurred for the purpose of providing the non-exempt services. 6      That right is an integral part of the VAT scheme and as a general rule may not be limited. It is exercisable directly in respect of all the taxes charged on input transactions. The deduction system is intended to relieve the trader entirely of the burden of the VAT payable or paid in the course of all its economic activities. The common system of VAT consequently ensures neutrality of taxation of all economic activities, whatever their purpose or results, provided that they are themselves subject in principle to VAT (see judgment of 4 October 2024, Voestalpine Giesserei Linz, C‑475/23, ‘the judgment in Voestalpine Giesserei Linz’, EU:C:2024:866, paragraphs 16 and 17 and the case-law cited). 7      It is apparent from Article 168 of the VAT Directive that, in order to enjoy a right of deduction, two conditions must be satisfied: (i) the person concerned must be a ‘taxable person’ within the meaning of the directive; and (ii) the goods or services relied on to confer entitlement to that right must be used by the taxable person for the purposes of its own taxed output transactions and, as inputs, those goods or services must be supplied by another taxable person (see judgment in Voestalpine Giesserei Linz, paragraph 19 and the case-law cited). 8      See the judgment in Voestalpine Giesserei Linz (paragraph 20 and the case-law cited). 9      See the judgment in Voestalpine Giesserei Linz (paragraph 21 and the case-law cited). 10      See judgment of 8 September 2022, Finanzamt R (Deduction of VAT linked to a shareholder contribution) (C‑98/21, EU:C:2022:645, paragraph 48 and the case-law cited). 11      Whether there is a direct and immediate link will depend on whether the cost of the input services is incorporated either in the cost of particular output transactions or in the cost of goods or services supplied by the taxable person as part of its economic activities (see judgment of 25 November 2021, Amper Metal, C‑334/20, EU:C:2021:961, paragraph 33 and the case-law cited). 12      See point 15 of this Opinion. 13      See judgment of 8 September 2022, Finanzamt R (Deduction of VAT linked to a shareholder contribution) (C‑98/21, EU:C:2022:645, paragraph 49 and the case-law cited). 14      Judgment of 6 September 2012 (C‑496/11, EU:C:2012:557, paragraph 45). 15      That case involved services acquired by Portugal Telecom, a holding company, from consultants under the VAT regime and invoiced to its subsidiaries. However, the circumstances of that case differ from those at issue here, inasmuch as the national legislation in question was not concerned with the imposition of purchase transactions but merely their classification. 16      Judgment of 21 February 2013 (C‑104/12, EU:C:2013:99, paragraph 32). 17      That case involved the acquisition by Mr Becker, the managing director and majority shareholder of a limited company, of legal services in connection with the initiation of a criminal investigation against him and against another managing director for bribery or complicity in the context of a tendering procedure. 18      Judgment of 18 July 2013 (C‑26/12, EU:C:2013:526, paragraph 25). 19      For completeness, I consider it appropriate to reproduce the latter point, which states, ‘by setting up the fund, PPG complied with a legal obligation imposed on it as an employer, and, in so far as the costs of the services acquired by PPG in that connection form part of its general costs, which is for the referring court to verify, they are, as such, component parts of the price of PPG’s products’. 20      As stated in the order for reference, Paragraph 1 of Decree No 92/2012 lays down, in subparagraph 1, general requirements relating to the equipment of healthcare facilities and, in subparagraph 2(c), additional requirements concerning the equipment of hospital facilities. Furthermore, the annexes to that decree stipulate the requirements relating to the equipment of different types of healthcare facilities and the services provided by them. 21      See points 17 and 19 of this Opinion. In my view, that finding is also consistent with the case-law of the Court cited in point 20 of this Opinion. 22      Put another way, since the assignment of those goods and services to healthcare services is determined directly by that legislation based on their (possible) use, it could be presumed that those goods and services are assigned to the activity concerned. 23      Since the goods and services which are required to be purchased are not linked to all the activities pursued by the appellant in the main proceedings, the onus is on the appellant to demonstrate that those goods or services are assigned to the healthcare services it supplies. In that regard, the rules on the burden of proof, which are a matter for national law in accordance with the principle of procedural autonomy, play a decisive role, without prejudice to the principles of equivalence and effectiveness. Although that burden is initially borne by the taxable person, who is required to adduce evidence to establish a direct and immediate link between the input costs it intends to deduct and their assignment to transactions subject to output VAT, the existence of a statutory obligation which itself provides for that assignment could be sufficient to shift the burden of proof to the tax authorities. 24      In other words, as the Commission pointed out in its written observations, the mere fact that an establishment is able to pursue its main activity (consisting of carrying out exempt transactions) only because of the acquisition of certain goods and services – and that it is also able to pursue activities relating to the carrying out of taxed transactions – is not sufficient to demonstrate the existence of such a link. 25      Furthermore, as regards the methods or criteria for apportioning input costs, in the absence of express rules in the VAT Directive, it is for the Member States, in accordance with the instructions and methods set out in Article 173(2) and Articles 174 and 175 of that directive, to ensure that the deduction of input VAT is permitted only in proportion to the value of the transactions in respect of which VAT is deductible (see, inter alia, to that effect, Terra, B., Kajus, J., A Guide to the European VAT Directives, IBFD, 2024, in particular p. 1124). 26      Clearly, in such a situation, the onus is on the appellant in the main proceedings to demonstrate that that defibrillator may be used in its activities in the healthcare field. 27      See judgment of 14 September 2017 (C‑132/16, EU:C:2017:683, paragraph 40). 28      In that case, a company belonging to the Iberdrola group had (i) carried out, through a third company, reconstruction work on a pump station in a Bulgarian municipality and (ii) planned to construct buildings which could be connected to that pump station. Even though those works had also benefitted the municipality concerned, the Court nevertheless acknowledged that they were also, at least in part, necessary to meet the needs of the buildings constructed by that company, with the result that a right to deduct the costs of those works could, at the very least on a proportional basis, be conferred on it in respect of the property transactions in question.