At least not for VAT. That is what the European Court of Justice recently ruled in the – unsurprisingly – British case Bridge Union Ltd. It even concerned competitive bridge. However, the Court is of the opinion that, in bridge, the physical element is insufficient for it to be classified as a sport.
So what exactly is sport?
Although this is, of course, often abundantly clear, the Dutch tax court has already had to rule on this matter on several occasions. In a decision A long list of activities is provided, indicating whether or not they qualify as sport for VAT purposes. It is important to note that these must involve:
- active participation in sport by people;
- involving the use of a sports facility.
Sport and VAT
You may be wondering what the significance of this is. Providing the opportunity to practise sport does not fall under the sports exemption. The reduced VAT rate applies to this service. The reduced VAT rate is currently 6%. The Rutte III cabinet plans to increase it to 9% with effect from 2019(?).
At first glance, it might not seem particularly interesting to pay VAT on the costs involved in practising your sport. But it’s a different matter when paying that VAT opens the door to (substantial) VAT deductions.
This substantial VAT deduction applies, for example, when a sports park or hall is being built or refurbished, or when investments are made in the construction of artificial turf pitches or courts. By having the investment carried out by, for example, a trust, which then allows the sports club(s) to use the facilities, a substantial VAT benefit can be realised.
This method has been used extensively in the (recent) past. For a number of years now, however, we have increasingly found ourselves coming up against the tax authorities. Given the current state of case law, this is often unjustified, but it is something to bear in mind.
Sports administrators: PLEASE NOTE
However, a far-reaching change in the law is on the horizon. This has been the case for some time, but it is still unclear when this change will actually be implemented.
The reason for the forthcoming amendment to Dutch law is the judgment handed down by the Court of Justice as far back as 2013 Bridport. On the basis of that judgment, the Netherlands may not restrict the sports exemption in its VAT legislation to services provided solely to members in return for membership fees.
Following the legislative amendment, the exemption will therefore be significantly broadened. The exemption will then cover all opportunities for sporting activities provided by non-profit organisations. A foundation that has invested in the (new) sports facilities will then be exempt from VAT. The VAT on the investments cannot then be deducted.
It is not known whether the legislative amendment will be accompanied by transitional provisions. Directors of foundations that are liable for VAT and operate sports facilities would be well advised to consider whether it makes sense to take measures to ensure that the forthcoming legislative amendment does not lead to VAT issues.
VAT and much more
Sports administrators do not only have to deal with VAT. Other taxes may also be relevant. You can read about this in our comprehensive guide Tax liability of foundations and associations.