ECJ VAT C-409/24, C-410-24, C-411/24 – AG Opinion – VAT Treatment of Ancillary Services: Separate Standard Rate Taxation Allowed

On September 25, 2025, the ECJ issued the AG Opinion in the joined cases C-409/24 (J-Gmbh), C-410/24 (D), C-411/24 (D Gmbh).

Context: Reference for a preliminary ruling – Value added tax (VAT) – Directive 2006/112/EC – Accommodation in hotels and similar establishments – Reduced rate of VAT – Services ancillary to the accommodation

Summary

Case Background: The Advocate General addressed the compatibility of German VAT legislation with the VAT Directive concerning the taxation of ancillary services, such as breakfast and parking, provided alongside short-term accommodation in hotels.
Key Questions: The central issue was whether ancillary services should be taxed at the same reduced VAT rate as the primary accommodation service or if they can be taxed separately at the standard rate, as stipulated by German law.
Decision: The Advocate General concluded that Article 98(1) and (2) of the VAT Directive does not preclude national provisions requiring lodging establishments to tax ancillary services separately at the standard rate, even when these services are linked to the provision of accommodation.
Justification: The justification for this decision rests on the principle that Member States have the discretion to apply reduced rates selectively and that the German legislation promotes fiscal neutrality by preventing undue advantages for hotels over other service providers.
Implications: This opinion reinforces the ability of Member States to determine VAT rates for specific services within a composite supply, supporting the notion that ancillary services can be treated independently for tax purposes.

Articles in the EU VAT Directive

Article 2
1. The following transactions shall be subject to VAT:
(c) The supply of services for consideration within the territory of a Member State by a taxable person acting as such;

Article 24
1. ‘Supply of services’ shall mean any transaction which does not constitute a supply of goods.

Article 98
2. Member States may apply either one or two reduced rates.

3. The reduced rates shall only apply to the supply of goods and services in the categories set out in Annex III. The reduced rates shall not apply to electronically supplied services.
4. When applying the reduced rates provided for in paragraph 1 to categories of goods, Member States may use the Combined Nomenclature to establish the precise coverage of the category concerned.

Annex III:
List of supplies of goods and services to which the reduced rates referred to in Article 98 may be applied

12. accommodation provided in hotels and similar establishments, including the provision of holiday accommodation and the letting of places on camping or caravan sites;

Facts & Background

Context of the Cases: The cases involve requests for a preliminary ruling from the Bundesfinanzhof (Federal Fiscal Court, Germany) regarding the interpretation of the VAT Directive, specifically concerning the taxation of ancillary services provided by hotels and similar establishments alongside short-term accommodation.
Legal Framework: Under Paragraph 12(2)(11) of the German Umsatzsteuergesetz (UStG), a reduced VAT rate applies to short-term accommodation services. However, the law specifies that this reduced rate does not extend to ancillary services that are not directly related to the letting, even if they are included in the overall accommodation charge.
Case C‑409/24 (J-GmbH): J-GmbH operated a hotel and charged separately for breakfast and parking. The tax authorities determined that these ancillary services should be taxed at the standard VAT rate of 19% instead of the reduced rate of 7%. J-GmbH appealed, arguing that all services should benefit from the reduced rate as they form a single supply.
Case C‑410/24 (D): D operated a guesthouse offering accommodation and breakfast at an all-inclusive price. D requested that the tax assessment apply the reduced rate to the entire amount but was rejected by the tax authorities, who maintained that breakfast was an independent service subject to the standard rate.
Case C‑411/24 (D GmbH & Co. KG): This entity operated hotels that offered various services, including parking and Wi-Fi, free of charge. The tax authorities assessed these services at the standard rate, leading D GmbH & Co. KG to appeal, arguing these should also be taxed at the reduced rate due to their ancillary nature related to accommodation.
Legal Questions Raised: The referring court sought clarification on whether the VAT Directive allows for national legislation that requires separate taxation of ancillary services at the standard rate when those services are considered ancillary to a principal supply (accommodation) that benefits from a reduced VAT rate.
Concerns Over Compatibility: The Federal Fiscal Court expressed doubts about the compatibility of the German breakdown requirement with EU law, particularly considering recent case law suggesting that ancillary services should follow the tax treatment of the principal supply when they are closely linked.
Judicial Proceedings: The cases were stayed pending a decision from the Court of Justice of the European Union (CJEU), as the referring court awaited a definitive ruling on the interpretation of EU VAT law concerning the treatment of ancillary services linked to accommodation.

Questions

Are Article 24(1) and Article 98(1) and (2) of Directive 2006/112/EC, read in conjunction with Category 12 of Annex III thereto, to be interpreted as meaning that they preclude a national provision such as the second sentence of Paragraph 12(2)(11) of the Umsatzsteuergesetz (Law on Turnover Tax; ‘the
UStG’), under which a Member State may exclude, by means of a national requirement to break down transactions for tax purposes, supplies from the
reduced tax rate provided for by the Member State for the letting of living and sleeping spaces offered by a trader for the short-term provision of accommodation to strangers, which supplies do not directly serve the letting purpose but are remunerated by the consideration for such letting, even if those supplies are dependent supplies ancillary to the short-term provision of accommodation to strangers, such as (only) the provision of parking spaces as in this case?

AG Opinion

Article 98(1) and (2) of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax, read in conjunction with Point 12 of Annex III thereto,

must be interpreted as meaning that it does not preclude a national provision under which lodging establishments are required to tax services, such as breakfast, at the standard rate and separately from the short-term accommodation, which benefits from a reduced rate, even if those services are a dependant supply ancillary to that short-term accommodation.

ECJ Cases referred to

Stadion Amsterdam (C-18/17): This case examined whether different elements of a package, such as a stadium tour and museum admission, should be treated as a single supply for VAT purposes. The Court ruled that if services are so closely linked that they constitute a single economic supply, they should not be artificially split for VAT treatment.
Commission v. France (C-384/10): This case addressed the conditions under which Member States can apply reduced VAT rates selectively to specific aspects of a supply. It confirmed that Member States have the discretion to apply reduced rates to specific categories as long as fiscal neutrality is maintained.
Finanzamt X (C-XX/XX): Although the specific citation is not provided, the Advocate General mentions this case in the context of discussing the VAT exemptions provided by the VAT Directive. The judgment highlighted the distinction between exempt services and those subject to reduced rates.
The Escape Center (C-330/21): This case involved the VAT treatment of services related to entertainment and whether they could be treated as a single supply. It reaffirmed principles regarding the treatment of composite supplies and the application of reduced VAT rates.
Valentina Heights (C-733/22): This case further explored the application of reduced VAT rates and the conditions under which Member States may apply these rates to certain supplies.

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