Deloitte Comments On Implications Of French VAT Dispute

by Ulrika Lomas, for LawAndTax-News.com, Brussels

22 June 2005

Professional services firm, Deloitte has suggested that a French VAT dispute currently being considered by the European Court of Justice could have beneficial implications for businesses which take and retain deposits in other EU member states.

The dispute between the French authorities and the Eugenie-Les-Bains Spa, which was referred to the ECJ by the French Supreme Court (Conseil D'Etat) last month, seeks to decide whether VAT should be paid by hotels and restaurants on retained deposits in the event that their customers fail to arrive.

The spa has argued that VAT is a tax on the delivery of goods or the performance of a service, and that a no-show means that no such performance takes place. The retention of the deposit, therefore, merely represents compensation for lost business.

According to Deloitte, a ruling in the taxpayer's favour in this case could mean that enterprises such as hotels, restaurants and car hire firms could claim for the repayment of VAT in such circumstances.

However, the ECJ is not expected to reach a decision on the matter for two to three years.

Recommended