Brigitte Jakoby
by Brigitte Jakoby
So far, tax authorities in Germany have treated spa communities generously with respect to the deduction of input VAT. Collecting spa fees from tourists is considered to be an economic activity, one which entitles to deduct input VAT on all spa facilities. But now the German Federal Fiscal Court (BFH) has started to restrict the deduction of input tax in cases in which spa facilities, like a spa park, are accessible to the general public without paying a specific entrance fee.
In a recent case, the BFH dealt with the questions: Can spa fees be seen as payment for supplies?
Is a spa community acting as a taxable person? The community in this case levied spa tax on all guests. With this tax it financed its spa facilities, such as the spa park, spa house, and paths. These facilities were open to everybody without having to purchase an admission ticket. The municipality considered the spa tax as remuneration for the operating of its spa facilities and claimed full input VAT deduction for all supplies related to tourism. On 15 December 2021, the BFH made a submission to the ECJ regarding this case to obtain a ruling on whether the spa tax is remuneration for the exchange of services.
The ECJ must answer the following questions:
Does a municipality which levies a “spa tax” (in the amount of a certain sum per day) on visitors staying in the municipality (spa guests) for the provision of spa facilities (e.g. spa park) engage in an economic activity within the meaning of Article 2 (1) (c) of the VAT Directive if the spa facilities are freely accessible to everyone (and therefore also, for example, to residents who are not subject to the spa tax).
If the answer to question 1 is in the affirmative:
In the above circumstances of the main proceedings, when considering whether the treatment of the community as a non-taxable person would lead to “major distortions of competition” within the meaning of the second subparagraph of Article 13 (1) VAT Directive, is the relevant geographic market the territory only of the municipality?
On the one hand, there is the banal question of whether there is an exchange of services, even if only a certain group of people pays for them. But of particular interest is the answer of the ECJ to the second question regarding the coverage of the territory for competition, which could be the municipality itself, or the neighbouring communities, or the federal state, or even a wider geographic range.
Jakoby Dr Baumhof – Wirtschaftsprüfer Steuerberater Rechtsanwälte is a medium-sized, interdisciplinary company located in the south of Germany, with offices in Rothenburg ob der Tauber, located in Northern Bavaria, and Ebersberg, near Munich.
GGI member firmJakoby Dr Baumhof – Wirtschaftsprüfer Steuerberater RechtsanwälteRothenburg o.d.T., Ebersberg, GermanyT: +49 98 619 40 50
Advisory, Auditing & Accounting, Corporate Finance, Law Firm Services, Tax
In 1987, Brigitte Jakoby and her husband Eugen, both German Chartered Accountants and German Certified Tax Advisors, started collaborating together. Since 1996, she has been one of the Senior Partners at Jakoby Dr. Baumhof. Contact Brigitte.