- VAT deduction allowed for catering linked to hotel services – In judgment I FSK 2333/23 (1 July 2026), the Polish Supreme Administrative Court (SAC) confirmed that taxpayers providing hotel services as part of wider tourism activities, taxed under the ordinary VAT rules rather than the VAT margin scheme, may deduct input VAT incurred on purchased catering services.
- Standstill clause limits expansion of deduction restrictions – The Court relied on the standstill clause in Article 176 of the VAT Directive, which allows Member States to maintain certain historical VAT deduction exclusions but prevents them from introducing broader restrictions than those existing when the Directive entered into force.
- VAT neutrality prevails over domestic limitations – The SAC emphasized that national rules restricting input VAT recovery must be interpreted in line with the principle of VAT neutrality. Any domestic extension of VAT deduction prohibitions that goes beyond what is permitted under the standstill clause is incompatible with EU VAT law and cannot deny a taxpayer’s right to deduct VAT.
Source KPMG
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