An interesting ruling by the EU Court, regarding the interpretation of Article 98, 1 and 2 paragraph of the EU VAT Directive, seems worthy of mention. The article, notwithstanding the provisions of Article 96 of the same directive, regulates for each of the Member States the application of the standard rate for the supply of goods and services, and recognizes the right to apply a o two reduced rates, again for the supply of goods and services relating to the categories listed in Annex III of the same directive.
Point 14 of the aforementioned annex provides for “the right to use sports facilities”.
In the case in question, we are in Belgium, in the context of a dispute between a company subject to VAT for the management of “gyms” and the Belgian Tax Administration, it is disputed that for the use of the appropriate sports equipment individually or in groups, with or without limited assistance and with the proposal of personal training and group courses, the company believed that, pursuant to the aforementioned article 98, paragraph 2, first subparagraph, for this activity it could apply the reduced rate (in Belgium 6%) instead of the ordinary rate (in Belgium 21%) and for this reason has filed a request for reimbursement of the difference.
We said that point 14 of Annex III of the Community VAT Directive authorizes Member States to apply a reduced rate on the “right to use sports facilities” and neither the Directive itself nor the Implementing Regulation No. 282/2011, contain no definition of this notion, therefore this right is left to free interpretation.
In the Community legislature, the intention remains to favor the practice of sport and physical education, therefore the categories contained in Annex III considered particularly necessary, are made less onerous and, consequently, more accessible to the final consumer.
In this case, the company in question, in addition to granting access to the gym with the right to use the sports facilities, provides personalized assistance and group courses. The Commission notes that in these cases (… .. most of them, we add) it is necessary to verify whether the set of services proposed, which can be grouped into a single service, can fall within the aforementioned point 14 of the annex III.
We speak of a single service when the set of services offered are so closely connected that they form a single and unique service, which cannot be divided. This case occurs when a service, which we will consider main (access to the gym and use of equipment), is accompanied by other services, which we will consider ancillary (personalized assistance and group courses). The same tax treatment as the main service can be applied to this complex set of services.
Again for the case under analysis, the European Court has already stated previously that all the services relating to Sport and the practice of physical education are to be considered as a whole and therefore to be facilitated.
In particular, there are some activities, carried out inside the gyms, which require instructions for their practice or can only be practiced within a group course. In this case, the access to the facility, the individual instructions and the collective courses to which such access gives the right, are services connected to each other and constitute a single service. At the same time the packages and proposals made to customers provide for access to the premises and collective courses without any distinction of the system used and the participation or not in the collective courses, the eventuality constitutes concrete proof that the entire offer constitutes a unique performance.
Coming to the conclusions that interest us, the EU Court has decided that a provision of services relating to the granting of the right to use a sports facility and assistance to individuals or groups of people by employees, can be subject to a single reduced VAT rate in the event that assistance is necessary for the practice of sport and physical education or the assistance just mentioned is ancillary to the right of use or actual use of the same and equipment.
It is natural that this decision must be acknowledged and regulated by the Italian State, which may apply the reduced VAT rate for this case and not the normal one and may also fully implement or limit the application of this reduced rate by considering specific elements of this category of benefits.
The Italian sports world is waiting confidently!
EU Court Judgment of 22/9/2022 Case C-330/21 between The Escape Center BVBA Vs. Belgische Staat
[ Gianluca Bruni ]
ASD expert accountant
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