What is the taxpayer’s business and where does the tax issue lie?

This time, the case concerns the tourism sector – more specifically, the hotel industry. Its resolution will determine whether, in the near future, invoices for hotel stays will always include a long list of various additional services used during the stay, each taxed at different VAT rates. Considering the opinion of the Advocate General of the CJEU, this may be a case that will lead to the definition of composite supplies being revisited – if not significantly narrowed again. In practice – because in theory, nothing has really changed for a long time.

The case before the CJEU involves three different situations in German hotels (C‑409/24, C‑410/24 and C‑411/24). 

In the first case, it concerns a hotel and a restaurant. In addition to accommodation, hotel guests could also have breakfast – either included in the room price or purchased separately if the guest initially opted for the room only and later decided to add breakfast. Additionally, the hotel and restaurant had their own car park, which could be used free of charge.

In the second case, it concerns a guesthouse. It offers clients accommodation and breakfast at an all-inclusive price. Guests cannot opt out of breakfast. Invoices issued for the services show gross amounts for accommodation, including breakfast. They do not indicate tax rates or amounts. The tax settlement for all services was based solely on one reduced rate applicable to short-term accommodation services.

In the third case, it concerns two hotels. Both have car parks with spaces for vehicles. Guests staying at the hotels, as well as external visitors, can use these spaces free of charge. In addition to accommodation and parking, the hotels offer wireless Wi-Fi, and one of them has fitness and wellness facilities – none of which incur separate charges.

The question, therefore, is: in each of these cases, do all these service variants constitute a single comprehensive service, subject to VAT at one (in this case, reduced) rate? Or rather, a whole range of different service combinations that should be settled and taxed separately (often at the higher, standard rate)?

What solution does the Advocate General of the CJEU propose?

According to Advocate General Tamara Ćapeta, NONE of the above cases involve a so-called composite supply, as defined in previous CJEU rulings. Let us recall that, according to the Court, a transaction consisting of several elements should not be artificially split. The starting point is always to look at a given group of services assuming they are separate elements. This makes it easier to identify those individual services which (from the purchaser’s perspective) have no independent economic sense (no one would want to use them separately, detached from another service). In other words, at least two services must be so closely linked that, from the point of view of the average consumer, they form a single, indivisible economic service. The Court confirmed this philosophy very clearly in its judgment in case C‑463/16 (Stadion Amsterdam CV), where the facts were perfectly suited to illustrate this point. Thus, whether a composite supply exists in a given case does not depend on the taxpayer’s will – for example, by modifying the nature of the service through the design of the offer. For instance, if I always add breakfast to the hotel bill because I offer accommodation only with breakfast (regardless of whether the guest eats it or not), this does not make breakfast an indispensable element of the accommodation service. It will still be the case that fully using the hotel service does not require eating breakfast in the morning.

This conclusion fits well with another aspect of the case – maintaining the principle of neutrality. If it were possible to freely influence the nature of services and combine them into larger packages practically at will, then in cases such as those described above – as the Advocate General rightly notes – “accommodation facilities would gain an unfair advantage over other businesses offering comparable services, such as bars, pubs, car parks, wellness centres, internet cafés, etc. If breakfast were subject to the same reduced rate as hotel accommodation, other establishments offering the same service would be in a less favourable position, as the breakfast they provide would be subject to the standard rate.”

The expected CJEU judgment will therefore be important for entities in the hotel industry, as it may force a review of how offers are structured and how VAT is settled. If the Court follows the Advocate General’s suggestions, we will once again receive a clear signal that composite supplies for VAT purposes are largely an objective category – and that excessive creativity in this respect is not advisable.verturned.