ECJ Clarifies VAT Liability for Indoor Playgrounds in Landmark Ruling
The European Court of Justice (ECJ) has clarified a significant VAT ruling. On October 6, 2023, it published a preliminary ruling in Case C-794/23, involving Legoland Deutschland GmbH, which operates indoor playgrounds. The ECJ ruled that the company is not liable for VAT incorrectly invoiced to non-taxable persons, even when similar services are provided to taxable persons.
The case revolved around an Austrian indoor playground operator who mistakenly charged a 20% VAT rate instead of the applicable 13% reduced rate to non-taxable final consumers. The ECJ clarified that the term 'final consumers who do not have a right to deduct input VAT' applies only to non-taxable persons, not taxable entities who do not exercise their right to deduct. This means that national tax authorities or courts may estimate VAT liability under simplified invoicing schemes, considering all relevant circumstances.
The ECJ's ruling in Case C-794/23 has provided clarity on VAT liability for incorrectly invoiced services. It has set a precedent that indoor playground operators, and other similar businesses, are not liable for VAT charged to non-taxable persons, even if they also serve taxable persons. This ruling will help businesses ensure they comply with VAT regulations and avoid potential liabilities.
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