VAT on Cosmetic Treatments: Is the Danish Administrative Practice Consistent with EU Law?

Abstract

The purpose of this thesis is to evaluate whether the Danish administrative practice regarding cosmetic treatments is consistent with the applicable law in the VAT Directive, art. 132(1) (b) and (c) and case-law of the European Court of Justice concerning the therapeutic purpose.
According to the Court the exemptions in the VAT Directive should in general be interpreted narrowly. The narrow interpretation has become a requirement for the services covered by the VAT exemptions in the VAT Directive, art. 132(1) (b) and (c), that there must be a therapeutic purpose. The problem of the therapeutic purpose concerns whether the cosmetic treatments are performed as a result of therapeutic reasons or beauty or well-being reasons.
The therapeutic purpose is defined as a service, whose purpose is to prevent, diagnose, treat and, as far as possible, cure diseases or other health irregularities. The Court has stated that the purpose of the exemption for health care is to reduce treatment costs. Based on this purpose, the Court has stated that, although there must be a therapeutic purpose, it does not necessarily follow, that the therapeutic purpose should be construed unnecessarily narrowly.
Cosmetic treatment is a service, which is not always covered by the Court’s stated concept of the therapeutic purpose. According to the VAT Directive and the case-laws it is required, that the service be performed by people with the necessary qualifications of the medical professions and that the service can be considered a treatment that follows a therapeutic purpose to be covered by the exemption from VAT. This thesis concludes that a cosmetic treatment, due to beauty or well-being reasons, is not included in the Court’s interpretation of the therapeutic purpose.
The thesis also concludes that the Danish administrative practice does not pose as EU-compliant and in accordance with the Court’s interpretation in all cases. There seems to have been a deviation in the Danish administrative practice from the Court’s interpretation of the VAT Directive concerning the services of cosmetic reconstruction of eyebrows or scalp as a result of a person’s course of disease, since the treatment is not exempted from VAT cf. VAT Directive, art. 132(1) (b) and (c) according to Danish administrative practice. The services are considered a treatment and pursue a therapeutic purpose in accordance with the EU-compliant interpretation. The Danish administrative practice states that the services are not exempted from VAT, due to that the practitioners do not meet the necessary qualifications – however, the same practitioners meet the necessary qualifications for cosmetic breast reconstruction. This means that the Danish administrative practice in some cases seems to interpret the VAT Directive more strictly, than it was intended given that the general objective of VAT Directive, art 132(1) (b) and (c) is to reduce the cost of healthcare for citizens.