1 Background
The German VAT Act provides for an apportionment requirement for the supply of accommodation services (see sec. 12 para. 2 no. 11 sent. 2 of the German VAT Act). According to this, only the supply of accommodation services is subject to the reduced VAT rate, (see sec. 12 para. 2 no. 11 sent. 1 of the German VAT Act), while the standard VAT rate applies to the supply of ancillary services that do not directly serve the purpose of accommodation (see sec. 12 para. 2 no. 11 sent. 2 of the German VAT Act). In the past, the XI. Senate of the Federal Fiscal Court, (decision of 24 April 2013 - XI R 3/11 - breakfast; decision of 1 March 2016 - XI R 11/14 - parking), was of the opinion that the apportionment requirement was in conformity with Union law and must take precedence over the principle of the unity of the supply, according to which a (dependent) supply of ancillary services shares the VAT treatment of the main supply.
Following the ECJ judgment of 18 January 2018 in the case Stadion Amsterdam CV (C-463/16), doubts were raised as to whether the national apportionment requirement complies with Union law (see KMLZ VAT Newsletter 04 | 2018). According to the ECJ, a single supply may not be split up, resulting in both the standard and reduced VAT rates applying simultaneously. With reference to the ECJ judgment in the Stadion Amsterdam CV case, the V. Senate of the Federal Fiscal Court, with its decision of 26 May 2021 (V R 22/20), referred the question to the ECJ as to whether the apportionment requirement for operating equipment pursuant to sec. 4 no. 12 sentence 2 of the German VAT Act takes precedence over the principle of the unity of the supply (see KMLZ VAT Newsletter 30 | 2021).
2 Suspension of execution decision of the Federal Fiscal Court
In its decision of 7 March 2022 (XI B 2/21), the XI. Senate of the Federal Fiscal Court granted the suspension of execution of VAT for supplies to which the national apportionment requirement, in accordance with sec. 12 para. 2 no. 11 sent. 2 of the German VAT Act, applies. The supplies in dispute concerned hotel accommodation, which included breakfast and access to the hotel’s spa facilities. Supplies of breakfast and spa services do not directly relate to the letting of accommodation and are therefore subject to the standard VAT rate in accordance with sec. 12 para. 2 no. 11 sent. 2 of the German VAT Act. In the opinion of the XI. Senate, there are now serious doubts as to whether the apportionment requirement set out in sec. 12 para. 2 no. 11 sent. 2 of the German VAT Act is compatible with Union law. The XI. Senate justifies these doubts on the basis of the decision referred by the V. Senate of 26 May 2021 (V R 22/20). The proceedings conducted at the ECJ under case no. C-516/21 could be transferred to the question concerning the dispute as to whether different VAT rates are possible in the case of a single supply in accordance with the national apportionment requirement pursuant to sec. 12 para. 2 no. 11 sent. 2 of the German VAT Act. In view of the still unresolved legal situation in this respect, the XI. Senate granted the suspension of execution and reserved the decision for the main proceedings.
3 Consequences for the practice
The Federal Fiscal Court's statements are convincing, even though the XI. Senate itself was not required to actually deal with the question of the conformity of the apportionment requirement in sec. 12 para. 2 no. 11 sent. 2 of the German VAT Act with Union law. Serious doubts as to the conformity with Union law could already be affirmed by referring to the V. Senate’s referral, without there being any need for the XI. Senate to contradict its previous jurisprudence. The XI. Senate’s decision on the suspension of execution thus brings fresh impetus to the discussion sparked by the ECJ judgment in the Stadion Amsterdam CV case as to whether the national apportionment requirement in sec. 12 para. 2 no. 11 sent. 2 of the German VAT Act complies with Union law.
Taxable persons providing supplies of accommodation services that fall within the scope of the apportionment requirement in accordance with sec. 12 para. 2 no. 11 sent. 2 of the German VAT Act should now file appeals against their VAT assessments. By referring to the proceedings of the Federal Fiscal Court, they can also apply for the suspension/cancellation of execution pursuant to sec. 361 of the German Fiscal Code. Due to the pending proceedings before the ECJ, it would be expedient for those taxable persons already engaged in proceedings to apply for a suspension in accordance with sec. 363 para. 2 sent. 2 of the German Fiscal Code.
It should be noted that, the present case merely concerns suspension of execution proceedings, i.e. the Federal Fiscal Court has provisionally assessed the legal situation in summary proceedings for interim relief. In the case C-516/21, the ECJ has now been given the opportunity to address the issue of the conformity of the national apportionment requirement with Union law. Irrespective of this, however, it is only a matter of time before the XI. Senate of the Federal Fiscal Court will be required to deal with this question in a main proceeding. At present, several appeal proceedings are pending before the XI. Senate on the question of the conformity with Union law of the apportionment requirement for supplies of accommodation services pursuant in sec. 12 para. 2 no. 11 sent. 2 of the German VAT Act, ref. no. XI R 34/20 - breakfast and parking; ref. No. XI R 35/20 - supplies of catering services; ref. no. XI R 7/21 - breakfast; ref. no. XI R 22/21 - parking, W-LAN and fitness facilities. Therefore, it is to be hoped, in the interest of the hotel industry, that the apportionment requirement in sec. 12 para. 2 no. 11 sent. 2 of the German VAT Act, which has been widely criticised since it came into force on 1 January 2010, will be put to the test under Union law.
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