The ECJ issued the preliminary ruling in the case C-409/24 (J-GmbH).
Context: Concerning turnover tax for 2018 and prepayment of turnover tax for January to May 2019
Summary
The question is whether Article 24(1) and Article 98(1) and (2) of Directive 2006/112/EC, read in conjunction with Category 12 of Annex III, prohibit a national provision such as the second sentence of Paragraph 12(2)(11) of the Umsatzsteuergesetz (Law on Turnover Tax), which allows a Member State to exclude supplies from the reduced tax rate for the short-term provision of accommodation, if those supplies do not directly serve the letting purpose but are remunerated by the consideration for such letting. Specifically, the question pertains to supplies that are dependent supplies ancillary to the short-term provision of accommodation, such as the provision of parking spaces in the present case.
Articles in the EU VAT Directive
Article 2
1. The following transactions shall be subject to VAT:
(c) The supply of services for consideration within the territory of a Member State by a taxable person acting as such;
Article 24
1. ‘Supply of services’ shall mean any transaction which does not constitute a supply of goods.
Article 98
2. Member States may apply either one or two reduced rates.
3. The reduced rates shall only apply to the supply of goods and services in the categories set out in Annex III. The reduced rates shall not apply to electronically supplied services.
4. When applying the reduced rates provided for in paragraph 1 to categories of goods, Member States may use the Combined Nomenclature to establish the precise coverage of the category concerned.
Annex III:
List of supplies of goods and services to which the reduced rates referred to in Article 98 may be applied
12. accommodation provided in hotels and similar establishments, including the provision of holiday accommodation and the letting of places on camping or caravan sites;
Facts & Background
- The applicant and appellant on a point of law (‘the applicant’) operated a hotel and restaurant with … rooms. With their accommodation, hotel guests also received breakfast, which was charged at EUR 4.50 if a guest opted for room only. The hotel and restaurant had its own car park, which could be used free of charge.
- Since June 2018, the applicant had been applying the reduced tax rate of 7% to accommodation, breakfast and parking as a single supply. The applicant declared supplies to this effect in its advance turnover tax returns for the months of June 2018 to May 2019.
- Following two tax audits carried out at the applicant’s premises for the months of April 2018 to June 2018 and July 2018 to May 2019, the auditor took the view that the breakfast and parking supplies should be taxed at the standard rate of 19%. […]
- The defendant and respondent on a point of law (Finanzamt; ‘the Tax Office’) followed the findings of the special turnover tax audit and, by assessment notices of 12 December 2018 and 18 October 2019, determined higher turnover tax prepayments for the months of June 2018 to May 2019. The applicant appealed against these notices.
- The Tax Office rejected the appeals as unfounded (appeal decision of 26 February 2020).
- The Sächsisches Finanzgericht (Saxony Finance Court) dismissed the action by means of its judgment of 23 September 2020 – 2 K 352/20, which was published in Entscheidungen der Finanzgerichte 2021, 244 (Decisions of the Finance Courts; ‘EFG’). It ruled that the provision of breakfast and parking were not supplies ancillary to the accommodation, but independent principal supplies. However, even if these supplies had been dependent supplies ancillary to the accommodation supplies to be taxed at the reduced rate, the Tax Office correctly broke down the transactions for tax purposes. Breakfast and parking were supplies which, within the meaning of the second sentence of Paragraph 12(2)(11) UStG, did not directly serve the letting purpose and were therefore excluded from the reduced tax rate provided for in the first sentence of Paragraph 12(2)(11) UStG. […]
- In its appeal on a point of law, the applicant submits that substantive law has been reached, and claims, in essence, that both the breakfast and the provision of parking each constitute dependent supplies ancillary to the accommodation aupply. […]
- The requirement to break down transactions for tax purposes (‘breakdown requirement’) contained in the second sentence of Paragraph 12(2)(11) UStG is contrary to EU law. By means of its judgment in Stadion Amsterdam of 18 January 2018 – C-463/16, EU:C:2018:22, the Court of Justice of the European Union (‘the Court’) prohibited the artificial breakdown into principal and ancillary supplies and taxation at different rates.
- The applicant therefore seeks an order setting aside the preliminary decision and amending the turnover tax assessment notice for 2018 of 6 February 2020 and the notices on turnover tax prepayments for January 2019 to May 2019, all as per the appeal decision of 26 February 2020, such that the breakfast and parking supplies are taxed at the rate of 7%.
- The Tax Office requests that the appeal on a point of law be dismissed as unfounded.
- The Tax Office defends the contested preliminary decision, maintaining in particular that the breakfast at issue in the present case was also an independent supply which guests could opt out of and which was shown in invoices accordingly. Neither the breakfast nor the provision of parking directly served the accommodation purpose. The Tax Office is claiming that the Court’s judgment in Stadion Amsterdam of 18 January 2018 – C-463/16, EU:C:2018:22 did not arise in relation to a national breakdown requirement. In its judgement in Commission v France of 6 May 2010 – C-94/09, EU:C:2010:253, the Court expressly acknowledged the permissibility of a national breakdown requirement, which takes precedence over the principle of single supply
- […][Proceedings stayed pending delivery of the decision by the Court in Case C-516/21]
- The applicant believes its legal view is confirmed by the Court’s judgment in Finanzamt X of 4 May 2023 – C-516/21, EU:C:2023:372, where the Court rejects artificial splitting of single supplies.
- The Tax Office counters this by claiming that the Court’s judgment in Finanzamt X of 4 May 2023 – C-516/21, EU:C:2023:372 is irrelevant to the matter at issue. Both the breakfast and the provision of parking are independent supplies which are not ancillary to the short-term provision of accommodation of strangers. Even if those supplies were to be regarded as ancillary to the accommodation supply, the principle that a dependent, ancillary supply shares the tax treatment of the principal supply, would be superseded by the national breakdown requirement. The Court’s decision in Finanzamt X of 4 May 2023 – C-516/21, EU:C:2023:372 does not mean that the second sentence of Paragraph 12(2)(11) UStG is contrary
to EU law.
Questions
Are Article 24(1) and Article 98(1) and (2) of Directive 2006/112/EC, read in conjunction with Category 12 of Annex III thereto, to be interpreted as meaning that they preclude a national provision such as the second sentence of Paragraph 12(2)(11) of the Umsatzsteuergesetz (Law on Turnover Tax; ‘the
UStG’), under which a Member State may exclude, by means of a national requirement to break down transactions for tax purposes, supplies from the
reduced tax rate provided for by the Member State for the letting of living and sleeping spaces offered by a trader for the short-term provision of accommodation to strangers, which supplies do not directly serve the letting purpose but are remunerated by the consideration for such letting, even if those supplies are dependent supplies ancillary to the short-term provision of accommodation to strangers, such as (only) the provision of parking spaces as in this case?
Similar ECJ Cases
Source
- Join the Linkedin Group on ECJ VAT Cases, click HERE
- VATupdate.com – Your FREE source of information on ECJ VAT Cases
