The Council of State (Conseil d’Etat), following an earlier judgment of the Court of Justice of the European Union (CJEU), concluded that non-refundable and unused multiple-entry movie theater cards and books of tickets are subject to VAT.
The taxpayer (a movie theater operator), in addition to selling single tickets, offered customers multiple-entry cards and books of tickets for which they paid full price at the time of purchase. These cards and books had an expiration date after which any unused tickets would no longer be refundable. According to the taxpayer, the amount corresponding to the portion of the price of any tickets and entries not used by the expiration date were not to be characterized as consideration for a service, but rather as compensation for the loss suffered by the taxpayer (movie theatre operator) due to the customer’s default. Accordingly, it was asserted that the sums paid in this respect would not be subject to VAT.
The Council of State, however, found that the movie theater operator placed customers in a position to attend movies, and that the sums paid when the tickets and entries were purchased were subject to VAT—whether or not the tickets and/or entries were used during their validity period.
Tax professionals with Fidal* have observed that the Council of State adopted a broad interpretation of the concept of “supply of services,” according to which, even if the customer did not actually benefit from the service rendered, the service is deemed to have been supplied as long as the customer was placed in a position to benefit from it. Thus, the mere fact that the customers did not actually avail themselves of the service (e.g., the projection of a movie) has no impact on the recognition of a supply of services.
Read a June 2016 report [PDF 40 KB] prepared by Fidal*
* Fidal is a French law firm that is independent from KPMG and its member firms.
The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.