Court of Justice

In DSAB Destination Stockholm AB (C-637/20) the Court found that tourist cards sold by the tax-payer to tourists visiting Stockholm, while the cards allowed access to Stockholm's public attractions and transport, qualified as multi-purpose vouchers.

The cards allowed admission to around sixty attractions and transport on the taxpayer’s sightseeing buses. The services provided had varying VAT rates between 6% and 25% and some of the services were VAT-exempt. The taxpayer had a contract with the service suppliers that required it to pay consideration equal to a percentage of the normal price of the services including VAT. Tourists were able to choose the value limit and active period for their cards.

The Swedish tax authority refused the taxpayer’s request for an advance ruling on the grounds that a multipurpose voucher needed to represent “a certain nominal value” and the varying redemption value of the cards mean that they did not qualify.

The Court found that theoretical use, or non-use, was not relevant to how the card should be classified and subsequently taxed and that it did not matter if it was impossible for an average consumer to take advantage of all of the services offered.

The Court’s decision means that VAT would not be charged at the time of DSAB’s sale of the city cards. Instead, VAT would be charged after either the buyer has used the card's full value or the card's validity period has expired.

The Court’s judgment mostly follows the Advocate General opinion issued in February 2022 (see our prior alert), which held that the cards functioned as multipurpose vouchers and suggested that the VAT directive required that the cards be taxed in line with their profit margins. While the Court did not offer an explanation on the specific time of supply and details of how tax should be accounted for (since this was for a national court), it was very clear that the cards constituted multi-purpose vouchers because the amount of VAT due was unclear at the time of issue. The Principal VAT Directive required the cards to be considered multipurpose vouchers and subject to varying VAT rates in accordance with their use.

DLA Piper comment: While the Court's decision is not surprising, it provides guidance for companies issuing cards/vouchers for which it is debatable whether such vouchers would qualify as a single or multi-purpose voucher. Nevertheless, the VAT accounting by the voucher issuer under such circumstances gives rise to some complexity which shows again that vouchers remain a hot topic of discussion.

In Happy Education SRL (C-612/20), the taxpayer was a commercial company providing educational services consisting of the organisation of activities supplementing the school curriculum such as homework support classes, educational programmes, foreign language classes, art classes, sporting activities, picking up children from school and the provision of after-school meals. This was known as a ‘school after school’ programme in Romania and the national law provided for schools to work in partnership with commercial organisations to put such a programme in place.

The Romanian tax authority argued that the taxpayer’s activities did not fall within the exemption for education as they were not part of the educational system and not authorised under the relevant Romanian law. The Court observed that the PVD exemption for education has two cumulative conditions: (i) the nature of the service must be educational; and (ii) the supplier of the service must be either a body governed by public law or an organisation recognised by the Member State concerned as having similar objects. Such recognition was granted under Romanian law primarily through the conclusion of a partnership with an educational establishment under the ‘school after school’ programme. As the taxpayer had not concluded such a partnership and notwithstanding that the classification of its activities on the trade register was ‘other education’, the taxpayer did not have the recognition or authorisation required for that purpose under Romanian law with the consequence that the taxpayer’s activities could not fall within the exemption. There was therefore no need to examine the nature of the taxpayer’s activities and whether they met the first condition for exemption.

DLA Piper comment: The Court’s decision is consistent with previous decisions e.g., on swimming lessons or driving lessons. The Court’s continues to adhere to the narrow view on the definition of "school and university education". While swimming or driving lessons might qualify as leisure activities there needs to be additionally a "school and university teaching" within the meaning of Article 132(1)(i) and (j) of the VAT Directive. Now, in the current decision, the Court points out that "school and university teaching" requires that the supplier of the service must be either a body governed by public law or an organisation recognised by the Member State concerned as having similar objects.

While the current decision indicates the Court´s interpretation of the VAT-exemption, as to what is a qualifying body taxpayers providing educational services need also to revisit the qualification of their services behind this background.