ECJ confirms single supply treatment

The European Court of Justice (ECJ) has again confirmed that where there is a single supply, it is necessary to apply a single rate to that supply: Stadion Amsterdam v Staatssecretaris van Financien (ECJ, 18 January 2018). That remains the case even where it is possible to determine the price for each “concrete and specific” element individually from the full price paid by the customer. The only exception to this rule is where there are statutory provisions which very clearly, through specific language, have the effect of excluding the application of a single rate of VAT in respect of a particular element of the single supply.

Background

The taxpayer in this case was responsible for running a multi-purpose building complex, consisting of the AFC Ajax football stadium and associated facilities. Those other facilities included the Ajax Museum of Football, the “World of Ajax”.

The supplies which formed the basis of the dispute in this case involved a guided stadium tour offered by the taxpayer, together with entry to the World of Ajax museum. A combined price of €10 was charged for the tour and museum entrance.

It was accepted that the tour was a single supply of services comprising two elements (the tour and the museum entry), which could not be separated, with the tour being the principal supply and the museum entrance being the ancillary component. Nevertheless, the taxpayer argued that, based on the ECJ case law in Talacre Beach Caravan Sales and Commission v France, it should nevertheless be possible to apply a reduced rate of VAT to one element of the single supply. In particular, whilst the standard VAT rate in the Netherlands was 21%, a lower rate of 6% was applicable to museum entrance fees.

Decision of the ECJ

Unsurprisingly, the ECJ has confirmed that where there is a single supply then a single rate of VAT must normally be applied to the various elements of that supply. In this case, the principal supply (the stadium tour) was subject to the standard 21% rate and so that must be applied to the whole of the consideration for the single supply, despite the fact that a separate supply of admission to the museum would have benefitted from the reduced rate of 6%.

The taxpayer in this case argued that (quoting from the Commission v France case) museum entrance was a “concrete and specific” aspect of a single supply, which could attract a separate, lower rate of VAT on the basis that where it is possible to distinguish a concrete and specific element within a single supply, to which the reduced rate of VAT would be applied if it were supplied separately, that reduced rate of VAT should therefore apply to that identified concrete and specific element of the supply, to the exclusion of the other aspects of that supply.

The court noted that the Talacre Beach and the Commission v France cases involved a very specific and limited exception to this general principle. In particular, only where there are "concrete and specific aspects" of a supply for which legislation has provided a particular VAT treatment, this may override the application of the same rate of VAT to all aspects of a single supply. In Talacre Beach, the UK zero-rating provisions specifically limited the zero-rating provisions so that they applied only to the caravan and not their removable contents. The same approach was also applied by the ECJ in the Commission v France case concerning French undertakers. The court rejected the European Commission’s complaint that applying a reduced rate of VAT to part of a single supply (transportation of the body) was contrary to EU law. The ECJ held that France was entitled to apply the reduced rate of VAT selectively, provided that it was only applied to "concrete and specific aspects" of a supply.

However, these cases were very limited exceptions to the general rule that a single VAT rate must be applied to a single supply. Where a single supply, such as the one in this case, comprises of two distinct elements, one principal, the other ancillary, which, if supplied separately, would be subject to different rates of VAT, the supply must be taxed solely at the rate of VAT applying to the single supply, based on the rate applicable to the principal element. That is the case even if the price of each element within the full price paid by the customer can be identified.

Comment

The decision of the ECJ in this case is not a surprise. In fact, what is surprising is that another single supply case has reached the ECJ. Whilst the decisions in Commission v France and Talacre Beach have raised questions over the scope of any exception to the requirement to apply a single rate of VAT to a single supply, it always seemed clear following Talacre Beach that this exception was limited to where the relevant statutory provisions specifically limit the rates applicable in a way that clearly overrides the single supply rule. The application of the lower rate of VAT to general museum admissions in this case fell well short of that particular hurdle.