In line with the EU VAT Directive, the Dutch VAT act contains a provision based on which education services and services closely related to education are, under certain conditions, exempt from VAT. In addition, the Dutch VAT act also qualifies the following services as education, thus exempting them:
- Vocational education provided by educational institutions recognised as such by the state
- General education which is financed by public means and is not solely meant for leisure pursuits
- Education in dance, drama, etc., to persons younger than 21 years
Furthermore, the conduct of examinations is considered by the Dutch VAT act as the equivalent of (exempt) educational services, provided it regards the examination following the exempted education.
The Dutch VAT act, in contrary to the EU VAT Directive, does not require the latter examination services to be provided by an institution which is recognised by the state as an educational institution in order for the examinations to qualify as VAT-exempted education.
In the case at hand, a Dutch BV prepares, sells and processes exams. The Dutch Court was referred with the question on whether or not the latter services qualified as VAT-exempt education.
In its ruling, the court stated that an important element of (the definition of) education is that knowledge is being transferred. The conduct of examinations lacks this transfer of knowledge and therefore cannot qualify as an educational service. Instead, the court ruled that the services at hand qualify as services closely linked to educational services. Consequently, the conduct of exams shall only be exempt from VAT in the event the education for which the exams are used is also VAT-exempt.
We note that the outcome of the case at hand is in line with the outcome which would follow from the Dutch VAT act, i.e., VAT treatment of examination services follows the VAT regime for education which is exanimated. However, by qualifying the examination services as services closely linked to education services, it has been made subject to the requirements the European Court of Justice provided in order to qualify as a service closely linked to educational services. The latter may effect the possibility to provide or procure VAT-exempt examination services.