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Brussels, 8 October 2009

VAT – Commission pursues infringement proceedings against Finland and Austria on the application of certain exemptions

The European Commission has formally requested Finland and Austria to change their legislation as regards the application of certain exemptions under the VAT Directive. The requests take the form of a reasoned opinion (second step of the infringement procedure provided for in article 226 of the EC Treaty). If the relevant national legislation is not amended to comply with the reasoned opinion, the Commission may decide to refer the matter to the European Court of Justice.

The VAT Directive establishes a common system of VAT which is based, inter alia, on a uniform definition of taxable transactions. The VAT Directive provides for exemptions from VAT for certain categories of transactions. It follows from the settled case-law of the European Court of Justice that all exemptions have to be interpreted restrictively in order to respect the neutrality of the VAT system. Therefore, granting an exemption which is neither provided for by the VAT Directive nor granted by the Council by means of derogation would be contrary to EC law.. Such illicit exemptions could lead to distortions of competition and would make it impossible to ensure that Member States contribute on an equal basis to the Community's own resources.

Under Article 132 of the VAT Directive, certain activities which are in the public interest are VAT exempt. That provision does not, however, provide exemption from VAT for every activity performed in the public interest, but only for those which are listed and described therein.


In Finland, under the national Income Tax Act, only entities of public interest that are liable for income tax for commercial activities are considered as taxable persons for VAT purposes. All other entities of public interest are excluded from VAT. Moreover, several activities carried out in the public interest which should be exempted from VAT according to the VAT Directive are not according to Finnish legislation.


The Commission considers that the Austrian VAT exemption for services closely linked to sport or physical education supplied by non-profit-making organisations to persons taking part in sport or physical education is too wide, since it applies, without any restriction, to all activities carried out by associations of public interest, whose objective is to exercise or promote sport.

Furthermore, the VAT Directive provides for an exemption for supplies of certain cultural services, and the supply of goods closely linked thereto. The Austrian VAT law, however, exempts all the running business of theatres, museums, zoos, natural preserves and botanical gardens, which goes beyond what is allowed under the Community law.

Finally, the Commission takes the view that Austria should broaden the scope of its VAT exemption rules so as to encompass certain supplies by non-profit organisations to their members as well as that of the exemption for certain fund-raising activities. The same finding applies to the national VAT exemption for supplies of services by independent groups, which has not been fully implemented, but rather limited to certain professional activities.

These Member States have been given two months to bring their legislation in conformity with Community Law.

The cases have been assigned No 2007/2371 (Finland) and No 2007/2453 (Austria) by the Commission.

For the press releases issued on infringement procedures in the taxation or customs area see:

For the latest general information on infringement measures against Member States see:

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