Contrary to its previous case law, the BFH has ruled that certain services provided by sports clubs which are remunerated separately must be treated as subject to VAT. Following consultation with the Court of Justice of the European Union, reliance on Article 132(1)(m) of the VAT Directive is now excluded.
Services to Members for Consideration
The ruling of the Bundesfinanzhof (BFH) directly concerns only services provided for separate consideration. The Court of Justice of the European Union and the BFH have further ruled that, contrary to prevailing practice, services that sports clubs provide to their members in return for general membership fees are also subject to VAT. If the BFH ruling is also applied in administrative practice, sports clubs must expect that the separate services will have to be invoiced subject to VAT. A VAT exemption will continue to be available only for sporting events within the meaning of § 4 Nr. 22 b UStG. A continuing full exemption of sports clubs from VAT liability would only be possible through a legislative amendment.
Litigation Before the BFH
In the case before the BFH, a golf club challenged the ruling of the tax office, which had declared the separate remuneration received by the golf club for certain services to be subject to VAT. These services include, for example, the right to use the golf course, the provision of golf balls, the sale of golf clubs, etc. The tax office considered the separate remuneration to be subject to VAT because it excluded a tax exemption under § 4 Nr. 22 b UStG. The reason for this was that the tax office doubted the non-profit status of the golf club. The non-profit status of a club requires that the dedication of assets to the club's purpose continues to apply even beyond the dissolution of the club. This dedication of assets means that the legislator and contractual partners have the assurance that the assets of the sports club are used exclusively for the intended purpose and that any misappropriation for private purposes is excluded.
The Fiscal Court (FG), by contrast, ruled in favour of the golf club and advocated a tax exemption for the services mentioned. In doing so, the FG relied on the tax exemption of the services under Article 132(1)(m) of the VAT Directive.
For the final clarification of the dispute, the BFH consulted with the Court of Justice of the European Union. The latter had already ruled previously that reliance on the tax exemption under the VAT Directive is no longer possible (CJEU, judgment of 10 December 2020, C-488/18). This applies in particular where there is no dedication of assets to the club's purpose or where the non-profit status of the sports club is doubtful. The BFH followed the decision of the Court of Justice of the European Union.
Frequently asked questions
Frequently asked questions
Are separately remunerated services provided by sports clubs subject to VAT?
Yes, under the revised case law of the BFH, services provided by sports clubs for separate consideration are generally subject to VAT. Examples include the right to use sports facilities, the provision of sports equipment, or the sale of gear. Reliance on the VAT exemption under Art. 132 (1) (m) of the EU VAT Directive is no longer possible.
Which VAT exemption is still available for sports clubs under the UStG?
For sports clubs, a VAT exemption is now only possible under Section 4 No. 22 lit. b UStG for sporting events. Any broader general exemption could only be achieved through legislative amendment.
Can sports clubs invoke Art. 132(1)(m) of the VAT Directive?
No, a direct reliance on the VAT exemption under Art. 132(1)(m) of the VAT Directive is no longer possible following the CJEU judgment of 10 December 2020 (C-488/18) and the subsequent BFH decision. This applies in particular if the club's non-profit status is doubtful or if no binding allocation of assets to charitable purposes exists.
What role does the dedication of assets play for the tax-privileged status of a sports club?
The dedication of assets to the club's purpose is a prerequisite for tax-privileged status (Gemeinnützigkeit) and must continue even beyond the club's dissolution. It ensures that the club's assets are used exclusively for the statutory purpose and not diverted for private use. Without this commitment, the tax-privileged status is at risk and tax benefits no longer apply.
Are services covered by general membership fees also subject to VAT?
According to the ECJ and the BFH, services provided by a sports club to its members in return for general membership fees are, in principle, subject to VAT. However, it remains to be seen whether the tax authorities will fully adopt this view. Clubs should prepare for a corresponding change in practice.