Taxable Turnover, Entrepreneurial Status, and Input Tax Deduction of a Spa Town (BFH)

• Provision of spa facilities against tourist tax is a taxable supply for consideration
• Taxpayer can deduct input tax for services used for business purposes
• Taxpayer claimed full input tax deduction for tourism advertising expenses
• Tax authorities allocated input tax deduction based on revenue from tourism tax and spa tax
• Tax assessments for the years in question were increased
• Taxpayer filed a lawsuit against the tax assessments
• Tax court ruled in favor of the taxpayer
• Federal Fiscal Court overturned the decision and referred it back to the tax court
• Tax court found that the taxpayer’s provision of spa facilities against tourist tax met the conditions for being considered a taxable supply
• A municipality is considered an entrepreneur only if treating it as non-taxable would lead to significant distortions of competition
• A municipality is considered to have only one business for VAT purposes, including activities such as asset management and taxable support services
• Tax court did not consider that providing spa facilities to residents for free is a non-business activity.

Source: datenbank.nwb.de

Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.

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