“The ancillary service shares the fate of the main service”, one of the standard formulas of the VAT Act, is confirmed by a ruling of the European Court of Justice. However, the ruling can also be read as a criticism of the provisions of German VAT law, which provides for the allocation of turnover at different tax rates when premises are rented out with business equipment or hotel accommodation including breakfast.
The ECJ ruling of 18.01.2018 (ECJ, C-463/16) concerns the following case: Stadion Amsterdam CV had offered sightseeing tours (World of Ajax), which mainly consisted of a guided tour of the stadium and a non-guided visit to the AFC Ajax museum. The museum visit could not be booked separately, but only in conjunction with the stadium tour.
In the legal dispute over the applicable VAT rate, it was debated whether the entire service was to be valued at the standard VAT rate or whether the service was to be divided into the stadium tour, which was to be taxed at the standard rate, and the museum visit, which was to be taxed at the reduced rate. It was undisputed that this was a uniform service overall.
The ECJ ruled that – even if it was easy in this case to allocate separate remuneration components to the separate service components – the uniform service was to be taxed at a uniform tax rate. The main service for the stadium tour, which was to be taxed at the standard rate, was decisive for the applicable tax rate. This tax rate was also to be applied to the ancillary service of the museum visit.
Applied to the provisions of German VAT law, this could mean that apportionment requirements for uniform supplies are not compatible with the provisions of the VAT Directive. This would have consequences for room lettings with simultaneous co-letting of operating equipment. The rental of the operating equipment would then also be exempt from VAT under Section 4 no. 12 UStG.
The separation of breakfast from the hotel’s accommodation turnover would also be questionable: if breakfast is to be regarded as a dependent ancillary service to accommodation, the separate VAT treatment of breakfast (Section 12 (2) no. 11 sentence 2 UStG) would not be compatible with the VAT Directive: the entire service would be subject to the reduced VAT rate, and hotel operators could refer to the EU regulation that is more favorable for them.
