Court of Appeal of The Hague has ruled that membership fees received by an association of owners of motorbikes of a particular make are not subject to VAT. Earlier this year, the District Court of North Holland reached a similar decision. See our article No VAT on car club membership fees. The association’s fundraising (ancillary) activities are subject to VAT (although …).
Explanatory Memorandum: Finance
The Ministry of Finance recently withdrew its appeal in cassation against the Court’s ruling. The reasoning The reason for this is that, in principle, the assessment must lie with the court which rules on the facts (and therefore not with the Supreme Court, but with the District Court and the Court of Appeal). The Court of Appeal has inferred from the facts and circumstances that the membership fees received are not directly linked to the association’s activities. Rather, the association acts as a cost-sharing entity or intermediary.
The Ministry is quick to add that this does not mean that, where applicable, a club’s membership fee is deemed to be direct remuneration for a service to be provided by the club. In such cases, the membership fee is subject to VAT, unless an exemption applies (for example, the sports exemption).
Taxable
The situation is different for products sold by the association via its online shop and club stall, and for advertising space in its club magazine sold to third parties. The association is required to pay VAT on the proceeds from these activities, even though the revenue from these activities is limited (in the year in question – 2020 – turnover of €1,320.52 was generated from the sale of products and €780.00 from the sale of advertising space).
The observant reader might say: “But surely the KOR applies in that case” (KOR = Small Business Scheme). The Court agrees with this, given that the total turnover of €2,100.52 is below the KOR threshold of €20,000. However, for the KOR to apply successfully, it is essential that the association had registered with the Tax and Customs Administration before 1 January 2020, using the appropriate form, to apply the KOR (had the membership fee, which amounted to €21,005.00 in 2020, been included, the KOR threshold would have been exceeded). As a result of the application of the KOR, the proceeds from the sale of products and advertising space are exempt from VAT.