In our article Bridging is not a sport we cited the upcoming widening of the sports exemption. That widening will take effect from 1 January 2019.
Widening exemption
The word widening has a generally positive connotation. Therefore, not everyone realises that the consequences of the widening are negative for much of sport. If you are exempt, you don't have to pay VAT. But you are also not allowed to deduct VAT.
And it is precisely through the deduction of VAT that a substantial VAT advantage is obtained in the operation of many sports facilities. The fee for operating the sports facility is taxed with VAT at the reduced rate of 6% (giving the opportunity to practise sport). And this fee is then also low in relation to the costs involved in the accommodation. After all, sports clubs cannot pay higher fees.
That VAT advantage will disappear after the sports exemption is widened. And that this is detrimental has already been recognised. The government expects an extra €241 million in revenue due to the widening. This benefit will be channelled back, with €153 million going to municipalities and the rest (€88 million) to other parties involved in sport. It is not clear who will be eligible for what compensation.
Commercial sport
The widening of the exemption does not extend to commercial sport. Organisations that provide opportunities to play sports and thereby realise profits intended to benefit others will continue to be subject to VAT. Examples include commercially operated gyms, golf complexes and the like.
For sports organisations that do not want to wait and see whether they are eligible for compensation, there is nothing else to do but explore (or have them explore) whether they can become “commercial”. Whether that is realistically possible obviously depends on the concrete situation. Can money flows be arranged in such a way that a positive balance is created? And can that surplus then be distributed in such a way that none of the finances that are desperately needed for sport are lost?
Sports organisations that cannot commercialise their activities would be wise to scrutinise their financial operating model (or have it scrutinised). Can they make financial ends meet even without VAT deduction? In that context, it is very important that the government quickly provides clarity on the details of the announced compensation. Will everyone be compensated? Will the VAT disadvantage for each individual situation be fully compensated?
The Sport and Municipalities Association is holding a file at on this topic.