The question of whether a supply constitutes a composite supply for VAT purposes continues to be a matter of debate. The outcome depends heavily on the specific facts and circumstances of each individual case. And this outcome may change over time.
Wi-Fi
Wireless Fidelity, or Wi-Fi, now seems to have become indispensable. Even when on holiday, many of us can no longer do without staying in touch via our mobile phones, tablets or laptops.
Accommodation providers are responding to this. They are setting up Wi-Fi networks to ensure that their guests can access the internet, use WhatsApp, and so on. The costs of this need to be recouped. The operator of a holiday park or campsite therefore offers its guests access to the internet in return for a separate fee.
However, he considers that, for the purposes of VAT, this service is included in the provision of accommodation in holiday homes or at the campsite. This accommodation is taxed at the reduced VAT rate.
Court
The Arnhem-Leeuwarden Court of Appeal However, it has been decided that the use of Wi-Fi constitutes a separate service. Consequently, VAT of 21%, rather than 6%, must be paid on the fees received.
The general rule is that where several transactions are carried out in relation to a customer, these transactions must be regarded as separate for VAT purposes. There are two exceptions to this general rule, which must be assessed from the perspective of an objective customer. The exceptions are transactions:
- which are so closely linked that, objectively speaking, they constitute a single, indivisible achievement;
- of which one (or more) element(s) constitutes (constitute) the main performance, whilst the other elements are to be regarded as ancillary performances which share the fate of the main performance.
Development
The Court notes that the average guest’s experience has changed over the years. Initially, no Wi-Fi was provided. Subsequently, a code was issued for a fee, allowing guests to access the network. Wi-Fi access for two devices is now included in the price of the stay.
The Court is assessing the middle scenario: that in which the Wi-Fi code is provided in return for payment. The Court bases its finding that this situation constitutes a separate payment on the following facts:
- the guest pays a separate fee for Wi-Fi access;
- Not every guest makes use of this facility (between 70% and 80% of guests collect Wi-Fi codes);
- Guests are free to choose whether to use the Wi-Fi and how many devices to connect;
- Guests clearly consider the availability of Wi-Fi to be important, as they complain as soon as the connection isn’t working properly;
- The use of the Wi-Fi has no functional connection whatsoever with the use of the holiday accommodation.
Latest news
The Court is ruling on the situation in 2015 and 2016. We estimate that this ruling might well turn out differently as of 2019. The availability of internet access in holiday accommodation has now become a key factor in a guest’s decision as to whether or not to stay at the accommodation. We consider this sufficient grounds for concluding that Wi-Fi access must be treated as part of the main service. In the case before the Court, this is further reinforced by the fact that Wi-Fi access is now included in the price of the accommodation.