CJEU: Reinvoicing accommodation services with the right to deduct VAT

In 2014, Grupa Lotos S.A., subject to VAT in Poland, purchased accommodation and restaurant services partly for its own use and partly for the purpose of reselling them to its subsidiaries. The company, contrary to the position of the tax authorities expressed in individual interpretation, took the position that in the event that the taxpayer acquires accommodation services on his own behalf in order to resale them, he should be treated as an entity providing the service. As a consequence, accommodation services and catering services will be subject to VAT at their resale. Therefore, VAT charged on their purchase should be deductible in accordance with Art. 86 par. 1 of the Act on valued added tax. Provided in art. 88 par. 1 point 4 of this Act, the restriction on the exclusion of the right to deduct in relation to accommodation and catering services should not be applied in this case, as Lotos Group is considered not as the final consumer of these services but as the service provider, similarly as VAT payers providing this type of service.

In reply to the question referred in the judgment of 2^nd of May 2019, the CJEU in Case C-225/18 „Lotos” stated that Directive 2006/112 / EC precludes the exclusion of the right to deduct input VAT when a taxpayer providing tourism services re-invoices it for other taxpayers in the provision of tourism services. At the same time, the CJEU added that the Directive does not preclude national legislation, which provides for the exclusion of the right to deduct input VAT on the purchase of accommodation and catering services. Which means that a taxpayer that does not provide tourist services is denied the right to deduct VAT charged on the purchase of such accommodation and catering services.

The Ministry of Finance in the Declaration of 27^th of May 2019 recognized that if the taxpayer acquires accommodation or catering services in order to provide tourism services, assuming that general principles apply to their taxation, the taxpayer obtainig such accommodation and catering services should have the right to deduct input VAT.

The CJEU ruling will allow taxpayers to reinvoice accommodation services to deduct VAT charged on the purchase of these services. At the same time, the CJEU confirmed that excluding the VAT deduction from accommodation services in other cases does not contradict the provisions of the Directive.