VAT must be paid by a business in the tax period in which the supply is made. However, if payment for the supply is received earlier, the VAT must be paid at that time.
Fitness centre membership
The operator of a fitness centre sells annual memberships. In December 2008, they receive the membership fees for memberships commencing on 1 January 2009. They pay the VAT during the course of 2009, the year in which the members use the centre’s facilities.
The Tax and Customs Administration is levying VAT retrospectively for the final tax return period of 2008 because the payments were received in advance in December 2008.
Results announced
The case will be heard Arnhem-Leeuwarden Court of Appeal. The operator argues that, at the time it receives the membership fee, it is not yet (sufficiently) clear whether it will actually provide the service. After all, it cannot be ruled out that the subscription holder may not attend the gym on one or more days in 2009 and will therefore not receive the service. Nor is it (sufficiently) clear exactly what service the operator will provide, as the membership holder is free to choose which sports classes to attend.
The Court of Justice has, in fact, ruled in its judgment BUPA Hospitals rules that payments received in advance are not subject to VAT where the relevant elements of the supply are not yet known.
The Arnhem-Leeuwarden Court of Appeal has ruled that the services to be provided in return for the subscription fees consist of making the fitness centre and all its associated facilities available. They do not consist of the individual services which the subscribers ultimately choose. The service to be provided is therefore sufficiently defined, meaning that VAT is due at the time the subscription fee is received in advance: in December 2008.