ECJ C-411/24 (D GmbH & Co. KG) – Questions – Interpretation of Reduced Tax Rate for Hotel Ancillary Supplies

The ECJ issued the preliminary ruling in the case C-411/24 (D GmbH & Co. KG)

Context:

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
1. Member States may apply either one or two reduced rates.
2. 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.
3. 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 case involves a hotel operator (the applicant) who provided additional services, such as parking spaces, a Wi-Fi network, and fitness and wellness facilities, to its guests without charging separately for them. In the turnover tax return, the applicant declared these supplies at the reduced tax rate, considering them to be ancillary to the provision of accommodation. However, the Tax Office disagreed and issued a turnover tax assessment notice subject to review, applying the standard tax rate to these supplies. The applicant appealed, arguing that the additional supplies should be taxed at the reduced rate.
Following a tax audit, the auditor and the Tax Office maintained that the supplies in question, including the Wi-Fi network, parking spaces, fitness, and wellness facilities, were taxable supplies subject to the standard rate. The Finance Court upheld this view, stating that the supplies were taxable at the standard rate and not eligible for the reduced rate under German law. The Finance Court held that the German legislator has the authority to selectively apply reduced rates to supplies that directly serve the letting purpose.
The applicant appealed on a point of law, claiming that the Finance Court erred in classifying the additional supplies as taxable supplies and failing to recognize that they directly serve the accommodation purpose. The applicant argued that the principle of single supplies should apply, requiring the reduced rate to be applied to all additional supplies related to the letting of hotel rooms.
The applicant seeks to set aside the preliminary decision and the appeal decision, while the Tax Office requests the dismissal of the appeal. The outcome of the case is pending, awaiting the decision of the Court in another related case.
The applicant believes that the Court’s judgment in Finanzamt X supports its view that the additional supplies should be subject to the reduced rate. However, the Tax Office argues that the judgment in Finanzamt X cannot be directly applied to the present case, as the services in question serve different purposes.

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 the provision of parking spaces, fitness and wellness facilities and of the hotel’s own wireless local network (Wi-Fi network) as in this case?

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