On 10 March 2011, the Court of Justice of the European Union (“ECJ”) gave judgment in four joined cases from the Bundesfinanzhof (Federal Finance Court) in Germany (Joined Cases C-497, 499, 501 and 502/09). The cases referred concerned the appropriate VAT treatment of foods supplied for immediate consumption, including as to whether the element of services or goods predominated when prepared food was served to customers other than in restaurant-like conditions.
Article in the EU VAT Directive
Article 5 and 6 of Sixth Council Directive 77/388/EEC
Article 5 (Supply of goods)
1. “Supply of goods” shall mean the transfer of the right to dispose of tangible property as owner.
2. Electric current, gas, heat, refrigeration and the like shall be considered tangible property.
3. Member States may consider the following to be tangible property: (a) certain interest in immovable property;
(b) rights in rem giving the holder thereof a right of user over immovable property;
(c) shares or interests equivalent to shares giving the holder thereof de jure or de facto rights of ownership or possession over immovable property or part thereof.
4. The following shall also be considered supplies within the meaning of paragraph 1: (a) the transfer, by order made by or in the name of a public authority or in pursuance of the law, of the ownership of property against payment of compensation;
(b) the actual handing over of goods, pursuant to a contract for the hire of goods for a certain period or for the sale of goods on deferred terms, which provides that in the normal course of events ownership shall pass at the latest upon payment of the final instalment;
(c) the transfer of goods pursuant to a contract under which commission is payable on purchase or sale.
5. Member States may consider the following to be supplies within the meaning of paragraph 1: (a) supplies under a contract to make up work from customer’s materials, that is to say delivery by a contractor to his customer of movable property made or assembled by the contractor from materials or objects entrusted to him by the customer for this purpose, whether or not the contractor has provided any part of the materials used;
(b) the handing over of certain works of construction.
6. The application by a taxable person of goods forming part of his business assets for his private use or that of his staff, or the disposal thereof free of charge or more generally their application for purposes other than those of his business, where the value added tax on the goods in question or the component parts thereof was wholly or partly deductible, shall be treated as supplies made for consideration. However, applications for the giving of samples or the making of gifts of small value for the purposes of the taxable person’s business shall not be so treated.
7. Member States may treat as supplies made for consideration: (a) the application by a taxable person for the purposes of his business of goods produced, constructed, extracted, processed, purchased or imported in the course of such business, where the value added tax on such goods, had they been acquired from another taxable person, would not be wholly deductible;
(b) the application of goods by a taxable person for the purposes of a non-taxable transaction, where the value added tax on such goods became wholly or partly deductible upon their acquisition or upon their application in accordance with subparagraph (a);
(c) except in those cases mentioned in paragraph 8, the retention of goods by a taxable person or his successors when he ceases to carry out a taxable economic activity where the value added tax on such goods became wholly or partly deductible upon their acquisition or upon their application in accordance with subparagraph (a).
8. In the event of a transfer, whether for consideration or not or as a contribution to a company, of a totality of assets or part thereof, Member States may consider that no supply of goods has taken place and in that event the recipient shall be treated as the successor to the transferor. Where appropriate, Member States may take the necessary measures to prevent distortion of competition in cases where the recipient is not wholly liable to tax.
Article 6 (Supply of services)
1. “Supply of services” shall mean any transaction which does not constitute a supply of goods within the meaning of Article 5.
Such transactions may include inter alia: – assignments of intangible property whether or not it is the subject of a document establishing title,
– obligations to refrain from an act or to tolerate an act or situation,
– the performances of services in pursuance of an order made by or in the name of a public authority or in pursuance of the law.
2. The following shall be treated as supplies of services for consideration: (a) the use of goods forming part of the assets of a business for the private use of the taxable person or of his staff or more generally for purposes other than those of his business where the value added tax on such goods is wholly or partly deductible;
(b) supplies of services carried out free of charge by the taxable person for his own private use or that of his staff or more generally for purposes other than those of his business.
Member States may derogate from the provisions of this paragraph provided that such derogation does not lead to distortion of competition.
3. In order to prevent distortion of competition and subject to the consultations provided for in Article 29, Member States may treat as a supply of services for consideration the supply by a taxable person of a service for the purposes of his undertaking where the value added tax on such a service, had it been supplied by another taxable person, would not be wholly deductible.
4. Where a taxable person acting in his own name but on behalf of another takes part in a supply of services, he shall be considered to have received and supplied those services himself.
5. Article 5 (8) shall apply in like manner to the supply of services.
Mr Bog sold drinks and food prepared for consumption (in particular, sausages and chips) from three identical mobile snack bars at weekly markets. The mobile snack bars were equipped with a sales counter with a glass splashguard, below and around which ran a ‘board’ made from a material sold under the name ‘resopal’ which could be used for the consumption of food on the spot. To the sides of the vehicle, above the drawbar, there was a folding ‘tongue’, which was in the form of a table at the same height and from the same material as the ‘board’ running round the vehicle. The area where customers could consume the food was protected from the rain by a folding roof.
In his turnover tax declaration for 1994 Mr Bog declared the turnover from the sale of drinks as subject to the standard rate of VAT, while the turnover from the sale of food was declared as subject to the reduced rate. In a special turnover tax check, the inspector found that Mr Bog’s customers generally consumed the goods on the spot. Since Mr Bog did not provide any information on the extent of the consumption taking place at the mobile snack bars, the sales of food subject to the standard rate of tax were estimated to be 70% of the total sales.
1. Articles 5 and 6 of Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes – Common system of value added tax: uniform basis of assessment, as amended by Council Directive 92/111/EEC of 14 December 1992, must be interpreted as meaning that:
– the supply of food or meals freshly prepared for immediate consumption from snack stalls or mobile snack bars or in cinema foyers is a supply of goods within the meaning of Article 5 if a qualitative examination of the entire transaction shows that the elements of supply of services preceding and accompanying the supply of the food are not predominant;
– except in cases in which a party catering service does no more than deliver standard meals without any additional elements of supply of services, or in which other special circumstances show that the supply of the food represents the predominant element of a transaction, the activities of a party catering service are supplies of services within the meaning of Article 6.
2. In cases of the supply of goods, the term ‘foodstuffs’ in category 1 of Annex H to the Sixth Directive 77/388, as amended by Directive 92/111, must be interpreted as also covering food and meals which have been prepared for immediate consumption by boiling, grilling, roasting, baking or other means.
Similar ECJ cases
- ECJ VAT C-703/19 (J.K.) – AG Opinion – Scope of the concept of a ‘restaurant service’ to which a reduced rate of VAT applies (Not yet decided)
How did countries implement the case?
- EU – Implemeng Regulation 282/2011 (Art. 6)
- Belgium – VAT rate on meals delivered to homes for handicapped people (Xirius)
- Belgium – Decision tax authorities on catering services (VAT House)
- Germany – BFH, ruling of 11 April 2013, V R 28/12 (KPMG)
- Netherlands: Supreme Court, 10/02532 application of ten percent rule and one or more services (Taxnewsreadar)
- Romania – order no. 3659/2018 (PwC)
- United Kingdom – HMRC internal manual VAT Food