A charity raises funds for food banks. It does this through the concept “One for food“. This concept involves restaurant guests making a donation of €1 per place setting to food banks. The aim is for this donation to be channelled to the food banks via 100%. The foundation seeks to cover its costs by asking restaurants to pay a contribution for taking part in the scheme.
The Gelderland District Court has ruled that the foundation provides services to the restaurants in return for payment, which makes it a taxable person for VAT purposes. These services relate to sales promotion and advertising. However, the foundation’s main activity is raising funds for food banks. The court regards this as a service not provided in the course of economic activity.
The proceedings concern the question of whether the foundation is entitled to deduct the VAT charged to it. However, the foundation has not sufficiently demonstrated that this VAT relates (in part) to its services provided to the restaurants. That VAT would be deductible. The VAT relating to non-economic activities (fundraising) may not be deducted. VAT that cannot be attributed exclusively to either of the two activities may, of course, be deducted under the (pre)pro rata rule, in proportion to the VAT-taxable turnover relative to the total turnover. Since no (VAT-chargeable) contributions had been received from the participating restaurants in the year to which the proceedings related, the (pre)pro rata scheme did not result in any VAT deduction in that year.
The court’s ruling is dated 12 November 2015. It is not known whether an appeal will be lodged.