ECJ VAT Case C-576/23 (Elite Games) – Order – VAT rate: Entertainment machines do not fall in scope of ”entrance fee to amusement parks”

On March 14, 2024, the ECJ issued its Order in the case C-576/23 (Elite Games).

Context: Reference for a preliminary ruling – Article 99 of the Rules of Procedure of the Court – Answer which can be clearly deduced from the case-law – Taxation – Value added tax (VAT) – Directive 2006/112/EC – Article 98 – Annex III, point 7 – Option for Member States to apply a reduced VAT rate to certain supplies of goods and services – Right of admission to amusement parks – Concept of “amusement parks

Article in the EU VAT Directive

Article 98 of the EU VAT Directive 2006/112/EC.

Article 98 (VAT rates)

1. Member States may apply a maximum of two reduced rates.
The reduced rates shall be fixed as a percentage of the taxable amount, which shall not be less than 5 % and shall apply only to the supplies of goods and services listed in Annex III.
Member States may apply the reduced rates to supplies of goods or services covered in a maximum of 24 points in Annex III.
2. Member States may, in addition to the two reduced rates referred to in paragraph 1 of this Article, apply a reduced rate lower than the minimum of 5 % and an exemption with deductibility of the VAT paid at the preceding stage to supplies of goods or services covered in a maximum of seven points in Annex III.
The reduced rate lower than the minimum of 5 % and the exemption with deductibility of the VAT paid at the preceding stage may only be applied to supplies of goods or services covered in the following points of Annex III:
- (a) points (1) to (6) and (10c);
- (b) any other point of Annex III falling under the options provided for in Article 105a(1).
For the purposes of point (b) of the second subparagraph of this paragraph, the transactions regarding housing referred to in Article 105a(1), second subparagraph, shall be regarded as falling under Annex III, point (10).
Member States applying, on 1 January 2021, reduced rates lower than the minimum of 5 % or granting exemptions with deductibility of the VAT paid at the preceding stage to supplies of goods or services covered in more than seven points in Annex III, shall limit the application of those reduced rates or the granting of those exemptions to comply with the first subparagraph of this paragraph by 1 January 2032 or by the adoption of the definitive arrangements referred to in Article 402, whichever is the earlier. Member States shall be free to determine to which supplies of goods or services they will continue to apply those reduced rates or grant those exemptions.
3. The reduced rates and the exemptions referred to in paragraphs 1 and 2 of this Article shall not apply to electronically supplied services, except to those listed in Annex III, points (6), (7), (8) and (13).
4. When applying the reduced rates and exemptions provided for in this Directive, Member States may use the Combined Nomenclature or the statistical classification of products by activity, or both, to establish the precise coverage of the category concerned.

Facts

Elite Games carries out, in Romania, recreational and leisure activities for children, falling under the CAEN 9329 code, by providing them with play equipment in specially designed premises inside large shopping centers . Children’s access to this equipment is through the purchase, from vending machines, of tokens with a unit value of 2.50 Romanian lei (RON) (approximately 0.50 euros).
Following a tax audit carried out from March 17 to June 15, 2020, the tax authorities issued, on June 19, 2020, a tax notice by which Elite Games was requested payment of the sum of 155 623 RON (i.e., on the date of issue of this notice, approximately 32,173 euros) relating to the VAT collected by it. Almost all of this amount, namely 136,556 RON (approximately 28,232 euros on that same date), was made up of the difference between the 5% VAT rate applied by this company on income from leisure games and recreational, and the 19% VAT rate resulting from the rectification carried out by the tax authorities.
Elite Games lodged a complaint against the said notice, which was rejected on September 24, 2020 on the grounds that the access it offered to the leisure and recreational facilities it operated did not constitute an admission service to the parks. attraction within the meaning of article 291, paragraph 3, of the tax code, allowing application of the reduced VAT rate of 5% to income from such services, without having any impact in this regard on the classification of the The company’s activity is code CAEN 9329.
On the one hand, according to the tax authorities, it would be necessary for the activity in question to be carried out in an amusement park as defined by national regulations, which would not be the case for the premises in which Elite Games supplies its services in this case. On the other hand, the prices that it sets would be per hour or per game and, therefore, the resulting payment could not be considered as being a right of admission to an amusement park in the common sense of the term.
In this context, on March 19, 2021, Elite Games filed an appeal with the Tribunalul Vaslui (Vaslui High Court) seeking the annulment, on the one hand, of the tax notice of June 19, 2020 and, on the other hand, the decision of September 24, 2020 rejecting his complaint.
By a decision of 12 January 2023, the Tribunalul Vaslui (Vaslui High Court) rejected Elite Games’ appeal, finding that the premises where the equipment made available by it was located could not be classified as amusement parks and that the acquisition of tokens did not constitute a right of admission to these premises, but rather represented the purchase of the right to play on an electronic gaming machine. According to this court, even if, through an extensive interpretation, the purchase of tokens were assimilated to a right of admission, it would not, in any event, be an admission to a amusement park, insofar as the right in question would guarantee access to a single device, placed in isolation in a space which would not constitute such an amusement park. Thus, the holder of a token would not find himself in an amusement park where he would be required to pay an admission fee upon entry.
Elite Games appealed against that judgment before the Curtea de Apel Iaşi (Iași Court of Appeal), which is the referring court. The latter has doubts as to the legal nature of the services offered by this company and wonders whether, where applicable, these can be qualified as admission services to amusement parks within the meaning of point 7 of the annex. III of Directive 2006/112, which may be subject to a reduced rate of VAT.

Question

The provision, to people, of entertainment machines for individual or collective use, located in a demarcated area within commercial spaces or shopping centers and operating on the basis of tokens or, where applicable, rights paid to their holder, in return for access to one of these machines, can it fall within the concept of “entrance fee to amusement parks” within the meaning of Annex III, point 7, of Directive [2006/112], in conjunction with Article 98 of that directive?

AG Opinion

None

Decision (Order)

Article 98(2) of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax, read in conjunction with point 7 of Annex III to that directive ,

must be interpreted in the sense that:

the installation, in a demarcated area within commercial spaces or shopping centers, of entertainment machines for individual or collective use and operating using tokens purchased from their holder or, where applicable, after paying a right to it, does not fall within the notion of “amusement parks”, within the meaning of this point 7. Consequently, the services giving access to them cannot benefit from the reduced rate of value added tax that the States members have the right to apply for admission to amusement parks.

Source