Facts
- The applicant, a state-recognised air spa town, collects a spa tax to cover the costs of maintaining spa and leisure facilities and events.
- The tax applies to non-residents staying in the municipality, residents whose focal point of life is elsewhere, and non-local persons attending professional events.
- The tax is not collected from day visitors, non-local persons or residents working or undergoing training in the municipality.
- The applicant claimed a deduction of VAT paid on input services connected with tourism but was denied by the defendant following an audit.
- The Finance Court ruled that the spa tax did not constitute a business activity and therefore was not liable to VAT.
- The deduction of input VAT was refused, and a revised tax assessment could not be issued to the applicant.
Questions
- Does a municipality that imposes a “spa tax” on visitors staying in the municipality for the provision of spa facilities carry out an economic activity under the VAT Directive if the spa facilities are freely accessible to everyone?
- If yes, is the municipal territory alone the relevant geographic market for examining whether treating the municipality as a non-taxable person would lead to significant distortions of competition under Article 13(1) of the VAT Directive?
Decision
- The referring court asks whether the provision of spa facilities by a municipality constitutes a “supply of services for consideration” within the meaning of Article 2(1)(c) of the VAT Directive, where the municipality imposes a spa tax on visitors staying in the municipality, but the facilities are freely accessible to everyone.
- To determine whether the provision of spa facilities constitutes an economic activity, it must first be established whether it supplied a service for consideration.
- A supply of services is carried out “for consideration” only if there is reciprocal performance between the provider and recipient of the service, and there is a direct link between the service supplied and the consideration received.
- However, it does not appear that there is reciprocal performance between the municipality and visitors entitled to use the spa facilities, as the payment received by the municipality cannot be regarded as resulting from the provision of the spa facilities.
