Comments on ECJ C-409/24 to C-411/24: Court Allows Exclusion of Ancillary Services from Reduced VAT

Case Background: Three German companies (J-GmbH, D, and D GmbH & Co. KG) offered short-term accommodation in hotels and guesthouses, bundling services like breakfast, parking, Wi-Fi, and wellness facilities for a fixed total price. The German tax authority contested the application of the reduced VAT rate of 7% on the entire package, insisting that only accommodation should qualify for the reduced rate, while ancillary services should be taxed at the standard rate of 19%.
Legal Questions: The core issue was whether national regulations requiring the separation of taxable transactions were compatible with Article 98 and point 12 of Annex III of the VAT Directive. The referring court noted potential conflicts with previous case law, particularly regarding the treatment of single economic performances under uniform VAT rates versus the selective application of reduced rates by Member States.
Court’s Ruling: The Court ruled that the VAT Directive does not preclude national laws from excluding ancillary services (like breakfast and Wi-Fi) from the reduced VAT rate, even when included in a fixed total price for accommodation. The ruling clarified that the principle from the Stadion Amsterdam case applies only when a Member State does not exercise discretion to apply reduced rates selectively, emphasizing that such separations must comply with the principle of fiscal neutrality to ensure equal VAT treatment for similar services.