Additional services at the hotel

Facts

The cases concerned three accommodation establishments that offered additional services alongside accommodation:

V R 8/26: In addition to its 62 rooms, the hotel provided a car park with 33 spaces, which could be used by hotel and restaurant guests without separate payment. Breakfast was also included in the room rate. If a guest wished to opt out of breakfast, they were credited €4.50.

V R 10/26: A guesthouse offered only overnight stays with breakfast at a flat-rate total price; guests could not opt out of breakfast.

V R 11/26: The claimant in this case operated two hotels with a car park. This was available free of charge not only to overnight guests but also to other visitors to the hotel and even to the general public. Furthermore, one of the hotels offered fitness and wellness facilities as well as Wi-Fi – both free of charge.

BFH ruling

The Federal Fiscal Court (BFH) had referred all the aforementioned cases to the European Court of Justice (ECJ) for a preliminary ruling. The issue at stake was whether it contravenes the VAT Directive if services not directly related to accommodation, as defined in Section 12(2)(11) of the German VAT Act (UStG), are excluded from the VAT reduction even when they constitute ancillary services to the reduced-rate accommodation. The reason for the BFH’s doubts was the inconsistent case law of the ECJ on this issue to date. In its judgements C-409–411/24 of 5 March 2026 (J-GmbH, D, D GmbH & Co. KG), the ECJ ruled that the apportionment requirement under Section 12(2)(11) of the German VAT Act (UStG) is compatible with EU law. Where Member States make use of the option under Article 98(1) of the VAT Directive to apply a reduced rate to the supplies listed in Annex III, they may limit themselves to concrete and specific aspects of a category. The list of services subject to a reduced rate and those subject to the standard rate in the VAT Implementation Act, together with Section 12(2)(11) of the German VAT Act, is concrete and specific. The principle of neutrality is not infringed.

Accordingly, the Federal Fiscal Court (BFH) ruled that breakfast was not subject to the reduced rate of tax in either case. In case V R 8/26, the fact that the hotel had provided guests with a benefit that could be consumed independently – and had thus supplied a service for consideration – was evident from the mere fact that the hotel had assigned a value of €4.50 to the breakfast, which would have been deducted had the guests opted not to have breakfast. However, in case V R 10/26 too, breakfast constituted a service provided for consideration, as the guests had no option to opt out of breakfast and the total consideration therefore also covered breakfast. The BFH was able to dismiss as irrelevant the Advocate General’s reasoning that, in the absence of consideration, there was no transaction subject to VAT, as the ECJ had not adopted this view either.

Breakfast is therefore subject to the standard VAT rate, irrespective of whether it is provided as a separate service or as an ancillary service. This is in line with the principle of neutrality, as hotels offering breakfast are treated in exactly the same way for VAT purposes as cafés, restaurants and other catering establishments. The same applies to fitness/wellness facilities and Wi-Fi.

As regards car parks, the Federal Fiscal Court (BFH) referred case V R 8/26 back to the Regional Tax Court because the estimate of the proportion of the total consideration attributable to car park use was legally flawed: the Regional Tax Court’s calculation showed that an average of 34.72 vehicles belonging to hotel guests had been parked in the car park, even though there were only 33 parking spaces. In case V R 11/26, the Senate concluded that no service provided for consideration had taken place, as the car park was also freely accessible to the general public. Consequently, hotel guests received no advantage other than that enjoyed by the general public, who pay no fee. In case V R 8/26, too, the Tax Court had to examine whether a taxable service provided for consideration existed at all, even if the general public was also permitted to use the parking spaces free of charge (which was not mentioned in the facts of the judgement).

Analysis

It came as a great surprise that the Advocate General sought to treat services for which no separate consideration was shown as being provided free of charge. After all, it is established case-law of the ECJ that, in such cases, part of the total consideration may be attributable to the allegedly free service. Fortunately, the ECJ dismissed this bold argument. The question of how the consideration is to be apportioned remains an interesting one.

Overall, there is now clarity for accommodation providers: only the overnight stay itself is subject to the reduced rate; everything else is not. As regards breakfast, however, it should be noted that restaurant and catering services (with the exception of drinks) are, as of 1 January 2026, subject to the reduced rate in all cases under Section 12(2)(15) of the German Value Added Tax Act (UStG).

In cases where turnover has been incorrectly invoiced at 7 %, VAT must be corrected and the shortfall paid in all cases where the limitation period for assessment has not yet expired. A transitional arrangement from the Federal Ministry of Finance (BMF) is not to be expected, as the tax authorities have always adhered to the principle of apportionment, which has now been confirmed. In principle, the increased VAT must be deducted from the previous gross amount if the invoice issued to the guest is not corrected. Whether the additional VAT can be claimed from the hotel guest depends on the civil law agreements, which should be reviewed. Guests who are taxable persons or who receive the service on behalf of a taxable person are entitled to an invoice showing the correct VAT, Section 14(2), second sentence, No. 1 of the German VAT Act (UStG), provided it is not a small-value invoice – where applicable, as an e-invoice.

Unfortunately, the ECJ has not resolved the difficulties in distinguishing between the three earlier ECJ judgements on apportionment in cases involving a reduced VAT rate or a VAT exemption, which had prompted the Federal Fiscal Court (BFH) to refer the accommodation cases for a preliminary ruling. From a German perspective, at least, this should not be too much of a problem, however, as both German statutory allocation requirements have now been clarified: the accommodation cases and the allocation requirement for business premises that do not benefit from the tax exemption for property lettings (ECJ C-516/21).

Curiously, the question of whether breakfast etc. constitutes ancillary services to accommodation remains unresolved. If they were not, they could not be taxed at the reduced rate in any case. As the ECJ has ruled that they may also be excluded from the reduced VAT rate as ancillary services, this question will probably remain open forever.

Author: Nadia Schulte