In late 2014, we announced that a pilot process would be pending, in which the question would be submitted to the tax court as to whether the supply of alcoholic beverages could be included in the restaurant service. To our knowledge, such a test case has still not been initiated. In recent ruling by the Gelderland District Court the issue came up anyway.
Performance in the hospitality industry
Performances in the hospitality sector are distinguished for VAT purposes into:
- supply of food and beverages;
- restaurant services.
The distinction between the two is of little importance to the hospitality industry in the Netherlands. Indeed, both the supply of food and beverages and restaurant services are taxed with VAT at the reduced rate of 6%.
Sports canteen
The distinction between supplies and services does matter for sports canteens. Since 2014, the canteen regulation no longer applies to sports associations. As a result, canteen services fall under the fundraising exemption, which applies to services up to €50,000 and to supplies up to €68,067.
Under the Court of Justice not as restaurant services. The additional service charge is too small to see the service as more than the provision of food and beverages.
See also our note Tax liability of foundation and association.
Alcoholic beverages
The supply of alcoholic beverages is explicitly excluded from the reduced VAT rate and therefore taxed at the general rate (21%).
Beer is considered an alcoholic beverage at an alcohol content of 0.5 or higher. Wine, port, sherry and spirits are subject to the 21% rate at an alcohol content of 1.2 or higher. There is an approval regime for mixed drinks.
Alcohol at lunches
A catering contractor served lunches and dinners. Naturally, alcoholic beverages were consumed while doing so. This restaurant owner considered that these alcoholic beverages were part of the restaurant service, so the reduced VAT rate should be applied.
He substantiates this claim by arguing that the way the Dutch legislator has regulated the exception for restaurant services violates the European VAT Directive. Like the Zeeland-West Brabant District Court however, the Gelderland District Court ruled that the VAT Directive allows the application of two different rates in the context of one restaurant service. The supply of the alcoholic beverage may thus be excluded from the application of the reduced VAT rate.
The court also overruled the entrepreneur's argument that it is virtually unfeasible to split sales because the market increasingly demands all-in prices.