For performances at theaters, concert halls, theaters and (pop) venues, it is customary that the ticket for the performance also includes a drink. But what is the VAT situation with such a combination of admission to the performance and the drink? Can the reduced VAT rate of 9% also be applied to the included drink? The Supreme Court recently issued an important ruling on whether the reduced VAT rate may be applied to these drinks.
Facts
The aforementioned case centers on the following situation. For a single payment, the visitor to a theater is given access to the performance, can use the checkroom and receives a drink during the intermission. Here the visitor can choose between an alcoholic or non-alcoholic drink.
These drinks are prepared during intermission. It is not possible to buy a ticket without an intermission drink. The theater applies the reduced VAT rate (9%) to the entire ticket price.
Main and ancillary performances
The theater's performance consists of several elements: admission to the theater performance, use of the checkroom and the intermission drink. In principle, each element must be assessed separately for VAT purposes. There are two exceptions to this:
- The indivisible economic performance
- The main and ancillary performance
This case revolves around the second exception. A service is incidental if for the so-called average consumer - the average customer - it does not serve an independent purpose and is only a means to make optimal use of the main service.
If it is an additional performance, it follows the VAT treatment of the main performance. If the intermission drink would qualify as incidental, then the provision of alcoholic drinks would also fall under the reduced VAT rate (whereas the provision of alcoholic drinks would fall under the 21% rate, if it qualifies as an independent performance).
Court of Appeal of 's-Hertogenbosch
According to the Court of Appeal, the intermission drink qualifies as an additional service. The interval drink makes the theater performance more attractive for the visitor. After all, the visitor does not have to queue up at the bar, because the drink is already ready. In addition, the visitor does not have to pay an extra amount for the drink.
Supreme Court ruling
Unlike the Court of Appeal, the Supreme Court concluded that the theater admission and the intermission drink qualify as independent performances for VAT purposes. The intermission drink is not a way to fully enjoy the performance because the intermission drink is not provided during the performance.
Although there is a link between the performances because of the joint price, this link is not sufficiently strong. For the average consumer, the intermission drink has a separate interest; after all, he is not obliged to drink anything. Alcoholic break drinks are therefore subject to the general VAT rate of 21%.
Consequences for practice
The Supreme Court ruling has important consequences for entrepreneurs in the cultural sector who sell tickets that include food and/or drink in addition to the performance. This ruling is also important for other entrepreneurs who offer packages that include various services.
This ruling makes it advisable to reassess whether the VAT treatment of this combination of performances is still correct. Although the situation discussed involves independent performances for VAT purposes, this is not always the case. It must be examined whether there are indications to assume that there is a secondary supply. According to the Supreme Court ruling, one of the relevant factors may be whether or not the drink is consumed during the activity.
If it is concluded that the various components constitute separate services, it must be determined what portion of the total price should be allocated to the regular VAT rate (21%). Coordination with the tax authorities may be desirable in this regard.
Reduced VAT rate for culture and entertainment remains
The previous cabinet wanted to abolish the reduced VAT rate for culture, media and sports. Ultimately, these plans did not go through. Cultural services - such as providing access to theaters, museums and cinemas - are therefore still subject to the reduced VAT rate.
Although the HR ruling is disadvantageous now, this outcome may actually be beneficial if the VAT rate is still raised in the future. Non-alcoholic drinks will then not be included in the higher rate of the main performance.
Want to know more?
Would you like to know more about the implications of this ruling for your business? Then please feel free to contact us via your relationship manager, by email at btw@govers.nl, or by phone at 040 - 2 504 504. Of course, you can also contact us with all your other tax questions.