Case in dispute
The plaintiff operates a retirement home. In addition to breakfast, lunch, and dinner, residents were also provided with a dining room on their respective ward. Moreover, during the years in dispute, the retirement home operated a cafeteria for residents and their relatives/visitors. The selection included coffee, cold drinks, homemade cakes, etc. In the view of the tax office, these sales are subject to VAT at the standard rate. The retirement home invoked the VAT exemption under § 4 No. 16 of the Umsatzsteuergesetz (VAT Act). According to this provision, sales are to be exempted from tax if they are closely linked to the care and support of persons in need of assistance.
BFH ruling: No VAT exemption
Contrary to the plaintiff, the BFH held that the sales from the operation of the cafeteria are indeed subject to VAT. The BFH based its decision on the EU VAT Directive (Mehrwertsteuersystemrichtlinie, MwStSystRL), which is closely connected to the tax exemption under § 4 No. 16 of the Umsatzsteuergesetz. Pursuant to Article 134(a) of the MwStSystRL, supplies of goods and services are excluded from this tax exemption if they are not essential to the provision of the care service. Since the cafeteria in this case was operated in addition to the regular meals provided to residents, it cannot be regarded as essential. The sales generated are therefore subject to VAT.
Frequently asked questions
Frequently asked questions
Are sales from a cafeteria in a retirement home exempt from VAT?
No, the BFH has ruled that sales from operating a cafeteria in a retirement home are subject to VAT. The exemption under § 4 Nr. 16 UStG does not apply, since cafeteria services are not closely linked to care and are not indispensable for the provision of care.
When are services provided by a nursing home VAT-exempt under § 4 No. 16 UStG?
Services are only exempt if they are closely connected with the care and support of persons in need of assistance and are essential for providing the care service. Additional services that go beyond standard care do not fall under the exemption and are subject to the standard VAT rate.
Why is a cafeteria not considered essential for nursing services?
Since residents already receive breakfast, lunch and dinner as well as dining rooms on the wards, the cafeteria merely represents an additional offering. It also serves relatives and visitors and is therefore dispensable for the actual nursing and care services.
What role does the VAT Directive play in assessing ancillary services?
Under Art. 134(a) of the VAT Directive (MwStSystRL), supplies of goods and services are excluded from the tax exemption if they are not essential to the underlying exempt supply. This requirement clarifies the interpretation of § 4 No. 16 UStG and means that only services closely linked to care are exempt.
Which VAT rate applies to cafeteria sales in care facilities?
Cafeteria sales in a care facility are generally subject to the standard VAT rate of 19%. A VAT exemption does not apply, and the reduced rate only applies if the respective requirements (e.g. take-away sales) are met.