THE NETHERLANDS:Reduced VAT rate of 6% applicable to BV which exploits hotel facilities for athletes

A Netherlands resident BV conducts the following activities:

– providing lodging and other services to athletes (against payments);
– advising organizers of important international athletic events;
– promotional activities for a certain individual.

From the beginning of 2000 the BV has in a new building at its availability a number of sleeping rooms, several kitchens, joint toilets and douches, a joint room with a phone, a pool table, and a soccer table. The BV allowed Netherlands and foreign athletes to stay against payment in the building. In 2001 the number of nights spend was 1,821 and in 2002 that number was 2,452.

At issue was whether the payments the BV received for the nights were subject to VAT at the normal rate of 19% or the reduced rate of 6% (on the basis of Post b.11 of Table I to the VAT Act). The Court of Appeal of Arnhem decided that in this case the 6% rate was applicable because the activities of the BV were in the area of lodging as defined in the relevant provision. The Court of Appeal rejected the arguments of the inspector that the BV focused on foreign athletes, the guests did not have an own room and the taxpayer did not commercially advertise for the lodging activity.

Apparently the BV had not at all charged VAT, the VAT reassessment was reduced by the Court with Euro 4,236 to Euro 1,103. Probably the tax authorities did an audit, during which they took the position that the BV was to be considered as an entrepreneur for VAT purposes.