Overnight stays in hotels are treated differently throughout Europe. While European VAT law requires that all services related to overnight stays in hotels be taxed at a uniform rate of 7 percent, Germany continues to deviate: currently, the VAT allocation rule prevails. This means that while German hotels charge the standard 7 percent VAT on overnight stays, they charge the higher VAT rate of 19 percent on other services – such as breakfast or the use of a hotel parking for which a fee is charged.
FEDERAL FISCAL COURT SEES NEED FOR CLARIFICATION
The Federal Fiscal Court (BHF) does not consider it certain whether the German view – i.e. the requirement to apportion VAT on hotel services – is legally compatible with European regulations. In this context, European VAT law is based on the assumption that all services related to the overnight stay in the hotel are to be seen as a single unit, which would then also have to be characterized by a uniform tax rate. This uniform taxation of turnover is then basically based on the so-called main service – in this case the hotel accommodation itself. This service is determined by the reduced tax rate, i.e. 7 percent, which must then generally apply to the entire service package of the hotel.
A similar case is being dealt with by the European Court of Justice (ECJ), which could certainly have an impact on the VAT allocation requirement regarding hotel accommodation. The specific case in which the German Federal Fiscal Court would like the
ECJ for a preliminary ruling deals with the rental of stables. It is to be assessed whether the services related to the VAT-exempt rental of stables are also not subject to VAT. If the current apportionment of VAT is found to be unlawful, this could also mean that hotel accommodation will soon also be subject to uniform taxation.
CONCLUSION: AN APPEAL IS WORTHWHILE
By appealing the current sales taxation, you can keep the tax treatment of such cases open until clarification. Do you have any questions? We will advise you.
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