The VAT principle of neutrality put to test in the gaming sector (ECJ Case 73/23)
Yaël Spiegl
by Yaël Spiegl
Yaël Spiegl has developed an expertise in indirect taxation, with a particular focus on VAT. She is a recognised expert in her field in Belgium. She is a partner and Co-Managing Partner at DALDEWOLF, as well as the Head of the Tax Law team.Contact Yaël.
The main question submitted to the ECJ in this case is whether Article 135(1)(i) of Directive 2006/112, and the principle of fiscal neutrality, must be interpreted as precluding national legislation which differentiates between online/offline lottery tickets and other forms of gambling offered online, by excluding the latter from the VAT exemption.
Broadly speaking, the VAT Directive leaves it to the Member States themselves to determine the conditions and limitations of the VAT exemption applicable to betting, lotteries and other forms of gambling. However, as underlined by the Court, when exercising their power to fix these conditions, the Member States must respect the principle of fiscal neutrality, which precludes treating similar supplies, in competition with each other, differently for VAT purposes.
According to the Court's long-standing position, services are considered similar when their differences do not significantly influence the average consumer’s decision to choose one service over another. In other words, if services are interchangeable from the consumer's perspective, their VAT treatment should be the same.
Regarding gambling activities, the Court states that differences relating to the minimum and maximum stakes and prizes, chances of winning, formats available and the possibility of interaction between the player and the game are liable to indeed have an influence on the decision of the average consumer, as the attraction of games of chance or gambling lies chiefly in the possibility of winning. On the other hand, the identity/legal form of the providers, the licensing category of the games and the applicable regulations are, as a rule, irrelevant in assessing the comparability.
Through this case law, the Court reinforces its stance on the exemption of gambling activities and clarifies the applicable criteria for assessing the principle of fiscal neutrality in gambling activities. The Court considers that the differences between lottery games and other forms of gambling (especially the fact that the winner is determined on a specific date and that the period between the purchase of the ticket and the result may be significant) appear likely to have a considerable influence on the decision of the average consumer; however, it is referring this for the Belgian court to judge.
Nevertheless, in our opinion, this view should be tempered by the growing similarities between games operated by online lotteries and those operated by other gaming operators in Belgium. While the Court acknowledges distinctions in traditional lottery draw games, the features of other lottery games, such as online scratch cards and interactive e-lottery games, will require careful examination by the referring court, whose - difficult - task will be to determine whether these games offered by the Belgian public operator are indeed interchangeable with those offered by the other providers.
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