VAT: Baštová (C-432/15) – CJEU Judgment

VAT: Baštová (C-432/15) – CJEU Judgment

This judgment concerns various VAT issues of a taxpayer who operates horse racing stables.

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Ms Baštová trains and looks after horses. The referring court had decided this was a single composite supply comprising three elements: training, use of sports facilities and care of the horses. The Czech Republic has a reduced rate for the use of sporting facilities. The question referred was whether this reduced rate could apply to Ms Baštová’s supply. The Court of Justice of the European Union (CJEU) has decided that unless that single supply is the use of the facilities, the reduced rate cannot apply. So if training is the main component, or all the elements are of equal importance, the reduced rate cannot apply. This was, however, for the referring court to decide. The CJEU went on to conclude that prize money was outside the scope of VAT but the taxpayer could still recover input VAT.

The judgment states that in addition to training horses for others, Ms Baštová trained her own horses which she entered into races with a view to earning prize money. The question concerned her right to deduct VAT on the costs of training and preparing her own horses. The CJEU decided that this VAT was deductible if it had a direct link to taxable supplies. A link would exist if she planned to sell the horses or if, by her horses running in and winning races, her training business was advertised and boosted so that she would earn more taxable income from other owners. 

Finally, the CJEU was asked about prize money and supplies. The CJEU thought that an owner does not make a supply to a race organiser by entering his horse in a race in the hope of winning a prize. There is only a supply by the owner if he is paid a fee by the organiser whether or not the horse wins a prize (that is to say the owner is paid money for the horse turning up, or a guaranteed sum for the horse participating in the race, win or lose). The CJEU did not think that the prize money itself is consideration for a supply. Here the CJEU has parted company from the Advocate General’s Office who thought prize money was consideration for a supply, despite the uncertainty of who will receive the money. 

 

For further information please contact :

Karen Killington 

Steve Powell

 

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