Antoine Druetz
- Sep 3
- 3 min read

Attention! Once again confirmed that Associations can be VAT-taxable persons

In this article, our partners at EY Law explore a recent European Court of Justice ruling challenging the common belief that non-profit organizations (NPOs) are exempt from VAT obligations. This is a crucial read for Association professionals looking to understand the potential VAT implications for their organizations and ensure compliance. Dive in to learn more about how this ruling could impact your NPO.

Based on our experience, it is a common debate amongst non-profit organisations (NPOs) whether they (can) qualify as a taxable person for VAT purposes and accordingly need to VAT register and comply with several VAT compliance obligations. Regularly within the sector, the point of view is taken that an NPO cannot qualify as a VAT-taxable person since it has no profit-making aim.

Nothing could, however, be further from the truth.

Recently, on 4 July 2024, the European Court of Justice (hereafter: “ECJ”) has in this respect once again confirmed that to the extent an NPO provides VAT-taxable supplies of goods and/or services, it is considered to be a VAT-taxable person carrying out an economic activity.

The case concerned an Association, established in Latvia, and providing training services to recipients. These services were provided within the framework of a project financed by the European Regional Development Fund. To carry out the training activities in question, the Latvian Association relied upon third-party training service providers who invoiced the Association for their services. The Association accordingly deducted the VAT on these services, since it in its turn invoiced the recipients. Furthermore, as part of the training services were funded by the European Union, the Latvian Association paid the funds received from the European Union to the recipients, and additionally invoiced them for the management costs in this respect.

The Latvian VAT authorities questioned the VAT deduction in the hands of the Association for the reason that it could not be considered as carrying out an economic activity due to its non-profit-making purpose. The question accordingly was raised before the ECJ.

The ECJ sets forth the general VAT principles by stating that:

The fact that, because of its legal form, a legal entity may engage in commercial activities only on an ancillary basis does not affect the existence of an economic activity designed to obtain income continuously, which is the criterion of economic activity within the meaning of Article 9, 1 of the EU VAT Directive;
The fact that the training courses were financed to a large extent by EU aid cannot affect the economic or non-economic nature of the activity carried out since the concept of ‘economic activity’ applies in an objective nature and accordingly without regard to the method of financing chosen by the operator concerned; and
Following the wording of article 9, 1 of the EU VAT Directive, a ‘taxable person’ means any person who, independently, carries out an economic activity, whatever the purpose or results of that activity.

It follows that an Association’s aim of simply balancing its accounts is not sufficient to rule out the possibility that it is carrying out an economic activity. For the same reason, an undertaking which seeks to make a profit but proves to be loss-making on a long-term basis would nevertheless remain a taxable person.

On the basis hereof, the ECJ concludes that the status of non-profit of an Association does not preclude an Association from being regarded as a taxable person carrying out an economic activity.

The aforementioned demonstrates how important it is to analyse the correct VAT status of your NPO. A verification of the VAT treatment and consequences of each (new) activity carried out on the VAT status of the NPO is required to avoid the VAT authorities imposing fines and late payment interests.

It furthermore could be an opportunity for your NPOs, since being considered a full VAT-taxable person allows you to deduct the VAT on costs incurred, and accordingly reduce the impact on your budget.