On 19 March 2026, the Court of Justice ruled in Nemocnice Kolín (C-513/24) on the VAT deduction for equipment that a hospital is legally required to have.
The case
A Czech hospital mainly supplies healthcare, on which VAT is not deductible. It also supplies other services that do give a right to deduct, such as clinical studies, accommodation for people accompanying patients, medical internships and sterilisation for third parties. In a supplementary return for December 2016, it claimed a proportional deduction of CZK 4,176,327, about EUR 164,500. The tax office refused CZK 3,287,723, about EUR 129,500, because the purchases were mainly for healthcare. The hospital argued that equipment required by law was a general cost.
The ruling
A statutory requirement alone does not turn such purchases into general costs. The Court set out two steps.
- Direct link first. Look at whether a purchase has a direct and immediate link with specific output transactions. Use is what may be decisive. If part of the equipment is also necessary for the deductible services, a direct link with those services can exist, which leads to a proportional deduction.
- General costs second. Only if there is no direct link with specific transactions does the question arise whether the purchase is linked to the economic activity as a whole. That could be the case, for example, where national law requires certain equipment for reasons of safety or comfort.
What to check
- Do not treat everything you must have by law as overhead. Start with what the item is actually used for.
- Keep records of the use of equipment in taxable and exempt activities.
- A duty under national law can still be relevant at the second step. It is simply not enough on its own.
mr. J. el Khalfioui LL.M.