On February 8, 2024, the ECJ issued its judgment in the case C-733/22 (Valentina Heights).
Context: Reference for a preliminary ruling – Common system of value added tax (VAT) – Directive 2006/112/EC – Article 98 – Option for the Member States to apply a reduced rate of VAT to certain supplies of goods and services – Annex III, point 12 – Reduced rate of VAT applicable to accommodation provided in hotels and similar establishments – Application of that rate only to accommodation facilities with a categorisation certificate – Principle of fiscal neutrality
Article in the EU VAT Directive
Article 98(2) in the EU VAT Directive 2006/112/EC.
Article 98 (Reduced VAT rate)
1. Member States may apply a maximum of two reduced rates.
The reduced rates shall be fixed as a percentage of the taxable amount, which shall not be less than 5 % and shall apply only to the supplies of goods and services listed in Annex III.
Member States may apply the reduced rates to supplies of goods or services covered in a maximum of 24 points in Annex III.
2. Member States may, in addition to the two reduced rates referred to in paragraph 1 of this Article, apply a reduced rate lower than the minimum of 5 % and an exemption with deductibility of the VAT paid at the preceding stage to supplies of goods or services covered in a maximum of seven points in Annex III.
The reduced rate lower than the minimum of 5 % and the exemption with deductibility of the VAT paid at the preceding stage may only be applied to supplies of goods or services covered in the following points of Annex III:
(a) points (1) to (6) and (10c);
(b) any other point of Annex III falling under the options provided for in Article 105a(1).
For the purposes of point (b) of the second subparagraph of this paragraph, the transactions regarding housing referred to in Article 105a(1), second subparagraph, shall be regarded as falling under Annex III, point (10).
Member States applying, on 1 January 2021, reduced rates lower than the minimum of 5 % or granting exemptions with deductibility of the VAT paid at the preceding stage to supplies of goods or services covered in more than seven points in Annex III, shall limit the application of those reduced rates or the granting of those exemptions to comply with the first subparagraph of this paragraph by 1 January 2032 or by the adoption of the definitive arrangements referred to in Article 402, whichever is the earlier. Member States shall be free to determine to which supplies of goods or services they will continue to apply those reduced rates or grant those exemptions.
Facts
The Defendant is a company that rented from the owners a tourist complex called “Valentina Heights” in Bansko (Bulgaria) from December 2016 to February 2020, and contracts dated 01-05-2018 show that the Defendant would manage the property , maintain and rent to third parties on behalf of the owners. During the audited period, the defendant provided accommodation to guests in the rented tourist complex. The income was booked through registered electronic cash registers and bank transfers, and the defendant charged 9% VAT on the transactions. A statement dated 15-02-2013 submitted by the mayor of Bansko shows that Valentina Heights is classified in the category of “guest house” with a capacity of 9 rooms and 19 beds. By order of the mayor of Bansko dated 07-03-2019, the classification in the category “guest house” has been lifted. This decision has not been challenged by the defendant. In the contested additional tax assessment, the tax authorities stated that the defendant did not possess a statement regarding the categorization of a tourist property for the period after 07-03-2019 and wrongly charged 9% VAT. The authorities have established the difference between the VAT charged and the maximum VAT rate of 20% for the notified services as an additional assessment under the Bulgarian Value Added Tax Act (the ZDDS). In its appeal against the additional tax assessment, the defendant argued that the application of the special scheme for taxation of tourist services depends on the type of activity carried out, and not on a notification governed by a special law. The Court of First Instance fully agreed with this argument and found that the defendant had taken all necessary measures to obtain a statement regarding the categorization, but that the competent authority did not issue the requested statement in time. Accordingly, that court explained that the absence of a declaration concerning the categorization of a tourist good cannot lead to the non-application of the special scheme for the taxation of tourist services, and that the application of this regulation depends on the type of activity carried out, and not on a notification regulated by a special law. The applicant, director of the “Disputes in Tax and Social Insurance Matters” Directorate in Sofia, argues before the referring court that the provision of tourist services which are not categorized by law cannot be equated with the provision of accommodation as referred to in the ZDDS and may not be subject to a reduced rate.
Consideration:
The referring court argues that there are no judgments of the Court which could be relevant to the outcome of the present case because of the finding of other facts relevant to the decision in question. However, the Court has ruled that Member States, when making use of the option provided for in Article 98(1) and (2) of Directive 2006/11, to apply a reduced VAT rate to a category of supplies listed in Annex III to that directive , he therefore has the option of limiting the application of this reduced VAT rate to concrete and specific aspects of this category. The question arises whether the circumstance where Bulgarian national law imposes additional requirements on the categorization of accommodation,
Questions
1 Is Article 98(2) of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax, read in conjunction with point 12 of Annex III to that directive, to be interpreted as meaning that the reduced rate set out in this provision for accommodation provided by hotels and similar establishments may be applied where these establishments are not categorized in accordance with the national legislation of the requesting State?
2 If this question is answered in the negative, Article 98(2) of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax, read in conjunction with point 12 of Annex III, to this Directive, then be interpreted as permitting a selective application of the reduced rate to concrete and specific aspects of a given category of services where the condition applicable is that hotels and similar establishments may only provide accommodation which, in accordance with the national law of the requesting State has been categorized or provisional statement has been issued that the categorization procedure has been started?
AG Opinion
None
Decision
Article 98(2) of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax, read in conjunction with point 12 of Annex III thereto,
must be interpreted as precluding national legislation under which the reduced rate of value added tax (VAT) for accommodation provided in hotels and similar establishments is subject to a requirement that such an establishment hold a categorisation certificate or a provisional categorisation certificate, in so far as that legislation does not limit the application of the reduced rate of VAT to concrete and specific aspects of the category of provision of accommodation provided in hotels and similar establishments or, in the event that it limits the application of that rate to those concrete and specific aspects, it does not comply with the principle of fiscal neutrality.
Summary
Source
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- Cited (recent) case law: The Escape Center (C-330/21), Segler-Vereinigung Cuxhaven (C-715/18), MICM (C-597/19), AZ (C-499/16), Oxycure Belgium ( C-573/15), (C-308/96 and C-94/97)
Reference to the case in the other EU MS
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