C-409/24 J-GmbH (Selective application of the reduced rate of VAT)

Provisional text

JUDGMENT OF THE COURT (Fourth Chamber)

5 March 2026 (*)

( References for a preliminary ruling – Common system of value added tax (VAT) – Directive 2006/112/EC – Article 98 – Option for the Member States to apply a reduced rate of VAT to certain supplies of goods and services – Short-term accommodation in hotels and similar establishments – Annex III, point (12) – Reduced rate of VAT applicable to accommodation provided in hotels and similar establishments – Supplies that are ancillary to accommodation – National regulations establishing a mechanism for separating taxable transactions – No application of the reduced VAT rate to supplies that are not directly used for the accommodation – Principle of fiscal neutrality )

In Joined Cases C‑409/24 to C‑411/24,

THREE REQUESTS for a preliminary ruling under Article 267 TFEU from the Bundesfinanzhof (Federal Fiscal Court, Germany), made by decisions of 10 January 2024, received at the Court on 12 June 2024, in the proceedings

J-GmbH

v

Finanzamt K (C‑409/24),

and

D

v

Finanzamt F (C‑410/24),

and

D GmbH & Co. KG

v

Finanzamt A (C‑411/24),

THE COURT (Fourth Chamber),

composed of I. Jarukaitis, President of the Chamber, M. Condinanzi, N. Jääskinen, R. Frendo and A. Kornezov (Rapporteur), Judges,

Advocate General: T. Ćapeta,

Registrar: A. Calot Escobar,

having regard to the written procedure,

after considering the observations submitted on behalf of:

– the German Government, by J. Möller and R. Kanitz, acting as Agents,

– the European Commission, by F. Behre and M. Herold, acting as Agents,

after hearing the Opinion of the Advocate General at the sitting on 25 September 2025,

gives the following

Judgment

Legal context and the dispute

1These requests for a preliminary ruling concern the interpretation of Article 24(1) and Article 98(1) and (2) of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax (OJ 2006 L 347, p. 1; ‘the VAT Directive’) and of point (12) of Annex III to that directive.

2The requests have been made in three sets of proceedings between, in Case C‑409/24, J-GmbH and Finanzamt K (Tax Office K, Germany), in Case C‑410/24, D and Finanzamt F (Tax Office F, Germany) and, in Case C‑411/24, D GmbH & Co. KG and Finanzamt A (Tax Office A, Germany), concerning the determination of the standard or reduced rate of value added tax (VAT) applicable to the various supplies of services provided in hotels and similar establishments in the context of short-term accommodation services.

Legal context

European Union law

3Under Article 2(1)(c) of the VAT Directive:

‘The following transactions shall be subject to VAT:

…

(c) the supply of services for consideration within the territory of a Member State by a taxable person acting as such’.

4Article 24(1) of that directive provides:

‘“Supply of services” shall mean any transaction which does not constitute a supply of goods.’

5Article 96 of that directive provides:

‘Member States shall apply a standard rate of VAT, which shall be fixed by each Member State as a percentage of the taxable amount and which shall be the same for the supply of goods and for the supply of services.’

6Article 98(1) and the first subparagraph of Article 98(2) of that directive stipulates as follows:

‘1. Member States may apply either one or two reduced rates.

2. The reduced rates shall apply only to supplies of goods or services in the categories set out in Annex III.’

7Annex III to the VAT Directive, which contains the list of supplies of goods and services to which the reduced rates of VAT referred to in Article 98 may be applied, includes, in point (12):

‘accommodation provided in hotels and similar establishments, including the provision of holiday accommodation and the letting of places on camping or caravan sites’.

German law

8The first sentence of Paragraph 1(1) of the Umsatzsteuergesetz (Law on Turnover Tax) of 21 February 2005 (BGBl. 2005 I, p. 386), in the version applicable to the facts in the main proceedings (‘UStG’), provides as follows:

‘The following transactions shall be subject to turnover tax:

(1) supplies of goods or services effected for consideration within the national territory by a trader in the course of his or her business. …’

9Article 12 of the UStG provides:

‘(1) The rate applicable to taxable transactions shall be 19% of the taxable amount …

(2) The rate of tax shall be reduced to 7% in respect of the following transactions:

…

11. the renting of living and sleeping spaces offered by a trader for the short-term accommodation of third parties, and the short-term renting of camping pitches. The first sentence shall not apply to supplies that are not directly used for the rental, even if the remuneration for those supplies is covered by the consideration for that rental.’

10Paragraph 4 of Section 12.16 of the Umsatzsteuer-Anwendungserlass (Ruling on the application of turnover tax) of 1 October 2010 (BStBl. 2010 I, p. 846; ‘UStAE’) provides that, where the following services are supplied alongside accommodation, they are to be subject to the reduced rate of VAT: the making available of furnished rooms and rooms equipped with other furnishings (for example, a television set, radio, telephone, safe); access to electricity; the making available of bed linen, towels and bathrobes; the cleaning of the rented rooms; the provision of personal hygiene tools, items for shoe cleaning and sewing kits; wake-up calls; use of a shoe cleaning machine; accommodation of animals in the rented living quarters and bedrooms.

11Paragraph 5 of Section 12.16 of the UStAE sets out a non-exhaustive list of supplies which do not qualify for the reduced rate of VAT, even where they are supplies ancillary to short-term accommodation within the meaning of Paragraph 12(2)(11) of the UStG. That list includes the following: the making available of conference rooms; the making available of rooms for the exercise of a professional or commercial activity; the making available of places to park vehicles that has been agreed separately; the making available of non-static motorhomes, caravans, camping trailers, houseboats and yachts; transport in railway sleeping cars; the making available of cabins on ships used for transport; the arranging of accommodation services; turnover from pet boarding; transfers of value for no consideration (for example, self-use of holiday apartments).

The disputes in the main proceedings and the questions referred for a preliminary ruling

Case C‑409/24

12J, a company incorporated under German law, operated a hotel and restaurant with a car park which could be used by its customers without it receiving any remuneration other than that which it received for the accommodation.

13In addition to the overnight stay, the supply of accommodation also included breakfast. However, customers had the option of forgoing the breakfast, and the cost of the breakfast was then deducted from the total amount invoiced.

14J argued that the overnight stay, the breakfast and the making available of parking spaces constituted a single supply and, consequently, applied the reduced rate of VAT of 7% to that supply as a whole.

15Following two tax audits carried out by Tax Office K concerning, inter alia, the period from June 2018 to May 2019, Tax Office K issued two assessment notices in which it found, in essence, that, under the second sentence of Paragraph 12(2)(11) of the UStG, the breakfast and the making available of parking spaces had to be separated from the supply of accommodation and taxed at the standard VAT rate of 19%.

16J lodged appeals against those notices, which were rejected by Tax Office K by decision of 26 February 2020.

17That company brought an action against that decision before the Sächsisches Finanzgericht (Finance Court, Saxony, Germany), which, by judgment of 23 September 2020, dismissed it essentially on the ground that the breakfast and the making available of parking spaces were not supplies ancillary to accommodation but rather were independent services. In any event, according to that court, even if those supplies could be classified as being ancillary to the supply of accommodation, Tax Office K had been correct to separate them from it, as required by the applicable national law.

18J therefore brought an appeal on a point of law against that judgment before the Bundesfinanzhof (Federal Fiscal Court, Germany), which is the referring court.

19That court takes the view that the Sächsisches Finanzgericht (Finance Court, Saxony) was correct in finding that breakfast, which customers were free to turn down and the price of which would consequently be deducted from the price of the accommodation, constituted an independent supply, which should therefore be subject to the standard rate of VAT.

20By contrast, that court states that, in the present case, the making available of parking spaces constituted a supply ancillary to the supply of short-term accommodation, given that the total price paid by customers did not vary according to whether or not they used the hotel car park. Nevertheless, since it is not directly used for the short-term accommodation, under the second sentence of Paragraph 12(2)(11) of the UStG, the making available of parking spaces had to be separated from the principal supply consisting of that accommodation and, consequently, had to be excluded from the application of the reduced rate of VAT.

21In that regard, the referring court takes the view that the VAT Directive does not preclude the requirement laid down in the second sentence of Paragraph 12(2)(11) of the UStG to separate from the supply of short-term accommodation any supplies which are not directly used for such accommodation, since, in principle, that directive, as interpreted by the Court, allows Member States to apply the reduced rate of VAT selectively within the categories of supplies of goods and services listed in Annex III to that directive, provided that the principle of fiscal neutrality is complied with.

22According to that court, it follows, in essence, from the judgments of 6 May 2010, Commission v France (C‑94/09, EU:C:2010:253), of 22 September 2022, The Escape Center (C‑330/21, EU:C:2022:719) and of 8 February 2024, Valentina Heights (C‑733/22, EU:C:2024:126) that Article 98 of the VAT Directive allows Member States to isolate the concrete and specific aspects of the categories of supplies listed in Annex III and, in compliance with the principle of fiscal neutrality, to apply the reduced rate of VAT only to those concrete and specific aspects.

23However, that court has doubts as to whether the mechanism for separating taxable transactions provided for in the second sentence of Paragraph 12(2)(11) of the UStG is compatible with the requirements arising from the VAT Directive, in the light of the judgments of 18 January 2018, Stadion Amsterdam (C‑463/16, EU:C:2018:22), and of 4 May 2023, Finanzamt X (Permanently installed equipment and machinery) (C‑516/21, EU:C:2023:372). In that context, that court explains that some German legal academics take the view that ancillary services must be treated in the same way as the principal supply for VAT purposes, with the result that the former cannot be separated from the latter.

24In those circumstances, the Bundesfinanzhof (Federal Fiscal Court) decided to stay the proceedings and to refer the following question to the Court of Justice:

‘Are Article 24(1) and Article 98(1) and (2) of [the VAT Directive], read in conjunction with Category 12 of Annex III thereto, to be interpreted as meaning that they preclude a national provision such as the second sentence of Paragraph 12(2)(11) of the [UStG], under which a Member State may exclude, by means of a national requirement to break down transactions for tax purposes, supplies from the reduced tax rate provided for by the Member State for the renting of living and sleeping spaces offered by a trader for the short-term provision of accommodation to strangers, which supplies do not directly serve the renting purpose but are remunerated by the consideration for such renting, even if those supplies are dependent supplies ancillary to the short-term provision of accommodation to strangers, such as (only) the provision of parking spaces as in this case?’

Case C‑410/24

25In the course of 2013, D operated a guesthouse and offered customers overnight accommodation with breakfast, which was included in the flat-rate overall price, regardless of whether customers chose to have it or not. The invoices showed that price, including taxes.

26In her VAT return for 2013, D declared both transactions at the reduced VAT rate of 7% and transactions at the standard rate of 19%.

27On 19 December 2018, referring to the judgment of 18 January 2018, Stadion Amsterdam (C‑463/16, EU:C:2018:22), D sent a request asking Tax Office F to amend the amount of VAT determined in respect of that return. In particular, D requested that all the transactions in the context of short-term accommodation entered into by her be taxed at the reduced VAT rate of 7%, since it is apparent, in essence, from that judgment that a single supply must be taxed at a uniform rate.

28By decision of 8 February 2019, Tax Office F refused that request.

29D brought an action for annulment of that decision before the Hessisches Finanzgericht (Finance Court, Hesse, Germany). That court dismissed the action, ruling, in essence, that the breakfasts provided by D were not subject to the reduced VAT rate but to the standard rate, since that reduced rate, provided for in the first sentence of Paragraph 12(2)(11) of the UStG, applied only to the supply of short-term accommodation and the second sentence of that provision laid down a requirement to separate from that supply any services that are not directly used for that supply. The fact that, in the present case, an overall price had been agreed was, according to that court, inconsequential.

30D lodged an appeal on a point of law against that court’s judgment before the Bundesfinanzhof (Federal Fiscal Court), which is also the referring court in Case C‑410/24, arguing, in essence, that breakfast was a supply ancillary to short-term accommodation since, in principle, the flat-rate overall price included breakfast, regardless of whether or not guests chose to have it.

31The referring court observes that, unlike in Case C‑409/24, in the present case breakfast is a supply ancillary to short-term accommodation, since – apart from one exception – the overall price paid by customers did not vary depending on whether or not they had breakfast. That being said, according to that court, in order to comply with the second sentence of Paragraph 12(2)(11) of the UStG and the principle of fiscal neutrality, breakfast must be separated from short-term accommodation and be subject to VAT at the standard rate, even though it is a supply that is ancillary to that accommodation.

32In that context and for the same reasons as those set out in paragraphs 22 and 23 of the present judgment, the referring court has doubts as to whether the requirement in the second sentence of Paragraph 12(2)(11) of the UStG that short-term accommodation be separated from supplies that are not directly used for such accommodation is in line with EU law.

33In those circumstances, the Bundesfinanzhof (Federal Fiscal Court) decided to stay the proceedings and to refer the following question to the Court of Justice:

‘Are Article 24(1) and Article 98(1) and (2) of [the VAT Directive], read in conjunction with Category 12 of Annex III thereto, to be interpreted as meaning that they preclude a national provision such as the second sentence of Paragraph 12(2)(11) of the [UStG], under which a Member State may exclude, by means of a national requirement to break down transactions for tax purposes, supplies from the reduced tax rate provided for by the Member State for the renting of living and sleeping spaces offered by a trader for the short-term provision of accommodation to strangers, which supplies do not directly serve the renting purpose but are remunerated by the consideration for such renting, even if those supplies are dependent supplies ancillary to the short-term provision of accommodation to strangers, such as the supply of breakfast as in this case?’

Case C‑411/24

34In 2011, D GmbH & Co. KG, a company incorporated under German law, operated two hotels with car parks and local wireless networks (wi-fi). One of those two hotels also had a gym and wellness facilities. Guests staying at those hotels could use those amenities and facilities without being invoiced separately.

35D submitted a VAT return for 2011 to Tax Office A, in which it claimed that the provision of services ancillary to short-term accommodation to customers of the hotels, at no additional cost, should be subject to the reduced rate of VAT.

36Tax Office A did not accept that analysis and carried out an on-site audit following which it found, in essence, by decision of 30 July 2019, that the making available of a wi-fi network, parking spaces, a gym and wellness facilities constituted transactions subject to VAT at the standard rate of 19%.

37D brought an action for annulment of that decision before the Finanzgericht (Finance Court, Germany). That court dismissed that action, holding, in essence, that the services referred to in the preceding paragraph of the present judgment constituted supplies made for consideration, within the meaning of Paragraph 1(1)(1) of the UStG, and that, in accordance with the second sentence of Paragraph 12(2)(11) of that law, those supplies could not be subject to the reduced rate of VAT.

38D brought an appeal on a point of law against the judgment of that court before the Bundesfinanzhof (Federal Fiscal Court), which is also the referring court in that case.

39The referring court takes the view, in the first place, that the Finanzgericht (Finance Court) was correct in finding that the supplies in question were provided by D for consideration. According to the referring court, the fact that D did not receive remuneration for those supplies separately from the remuneration received for short-term accommodation did not mean that those supplies were provided free of charge.

40In the second place, according to that court, the making available of a wi-fi network, parking spaces, a gym and wellness facilities constituted supplies ancillary to the principal supply, namely short-term accommodation, and, taken together with that supply, they formed a single supply.

41In that context, that court has the same doubts as those set out in paragraphs 22 and 23 of the present judgment as regards whether the requirement under the second sentence of Paragraph 12(2)(11) of the UStG, according to which supplies which are not directly used for that accommodation must be separated from short-term accommodation, is in line with EU law.

42In those circumstances, the Bundesfinanzhof (Federal Fiscal Court) decided to stay the proceedings and to refer the following question to the Court of Justice:

‘Are Article 24(1) and Article 98(1) and (2) of [the VAT Directive], read in conjunction with Category 12 of Annex III thereto, to be interpreted as meaning that they preclude a national provision such as the second sentence of Paragraph 12(2)(11) of the [UStG], under which a Member State may exclude, by means of a national requirement to break down transactions for tax purposes, supplies from the reduced tax rate provided for by the Member State for the renting of living and sleeping spaces offered by a trader for the short-term provision of accommodation to strangers, which supplies do not directly serve the renting purpose but are remunerated by the consideration for such renting, even if those supplies are dependent supplies ancillary to the short-term provision of accommodation to strangers, such as the provision of parking spaces, fitness and wellness facilities and of the hotel’s own wireless local network (Wi-Fi network) as in this case?’

Procedure before the Court

43By decision of the President of the Court of 15 July 2024, Cases C‑409/24, C‑410/24 and C‑411/24 were joined for the purposes of the oral part of the procedure and the judgment.

Consideration of the questions referred

44By its questions in each of the three joined cases, which should be examined together, the referring court asks, in essence, whether Article 98(1) and (2) of the VAT Directive, read in conjunction with point (12) of Annex III to that directive, must be interpreted as precluding national legislation which excludes from the scope of the reduced VAT rate applicable to short-term accommodation services provided in hotels and similar establishments supplies which are not directly used for that accommodation, such as the making available of parking spaces, a gym and wellness facilities, as well as access to the hotel’s wi-fi network and the provision of breakfast (‘the supplies at issue in the main proceedings’), even though they could be regarded as being ancillary to that accommodation due to the fact that the remuneration for them is covered by the flat-rate overall price paid for all the services supplied in the context of that accommodation.

45As a preliminary point, the Court notes that it is apparent from the orders for reference that the questions referred for a preliminary ruling are based on the premiss that, because the supplies at issue in the main proceedings are ancillary to the supplies of accommodation referred to in point (12) of Annex III to the VAT Directive, those services come within the scope of the latter provision, read in conjunction with Article 98 of that directive, which allow Member States to apply a reduced rate of VAT to ‘accommodation provided in hotels and similar establishments, including the provision of holiday accommodation and the renting of places on camping or caravan sites’.

46In that regard, the Court has held previously that supplies that are ancillary to a principal supply that is subject to a reduced rate of VAT may also, on that basis, be subject to the reduced rate (judgment of 22 September 2022, The Escape Center, C‑330/21, EU:C:2022:719, paragraph 41).

47As regards the question whether the supplies at issue in the main proceedings constitute supplies that are ancillary to the supply of accommodation provided in hotels and similar establishments, as the referring court states in its orders for reference, the Court notes that, according to settled case-law, questions on the interpretation of EU law are referred by a national court in the factual and legislative context which that court is responsible for defining, the accuracy of which is not a matter for the Court to determine (see, to that effect, judgment of 26 March 2020, Kreissparkasse Saarlouis, C‑66/19, EU:C:2020:242, paragraph 30).

48While it is therefore appropriate to proceed on the basis that the supplies at issue in the main proceedings are supplies that are ancillary to the supplies of accommodation provided in hotels and similar establishments in order to answer the questions referred, the Court nevertheless points out that there is a single supply where two or more components or acts supplied by the taxable person to the customer, being a typical consumer, are so closely linked that they form, objectively, a single, indivisible economic supply, which it would be artificial to split. That is also the case where two or more elements must be regarded as constituting the principal supply whereas, conversely, other elements must be regarded as one or more ancillary supplies and a supply must be regarded as ancillary to a principal supply if it does not constitute for customers an end in itself but a means of better enjoying the principal supply (judgment of 22 September 2022, The Escape Center, C‑330/21, EU:C:2022:719, paragraphs 25 and 26 and the case-law cited).

49That being said, with regard to the question raised in the present cases as to whether a Member State may nevertheless consider that only the principal supply of a single transaction, consisting of a principal supply and ancillary supplies, will be subject to a reduced VAT rate, it should be noted that, under Article 96 of the VAT Directive, each Member State is to apply the same standard rate of VAT to the supply of goods and the supply of services.

50As a derogation from that principle, Article 98(1) of that directive gives Member States the option of applying one or two reduced rates of VAT. In accordance with the first subparagraph of Article 98(2) of that directive, the reduced rates of VAT are to apply only to supplies of goods and services in the categories set out in Annex III to that directive.

51In that regard, it is clear from settled case-law that, where a Member State decides to make use of the possibility afforded under Article 98(1) and (2) of the VAT Directive to apply a reduced rate of VAT to a category of supplies set out in Annex III to that directive, it has, subject to the requirement to observe the principle of fiscal neutrality inherent in the common system of VAT, the possibility of limiting the application of that reduced rate of VAT to concrete and specific aspects of that category (see, to that effect, judgments of 6 May 2010, Commission v France, C‑94/09, EU:C:2010:253, paragraph 28, and of 5 September 2019, Regards Photographiques, C‑145/18, EU:C:2019:668, paragraph 42 and the case-law cited).

52That possibility is justified, inter alia, by the fact that, since that rate is the exception to the application of the standard rate set by each Member State, the restriction of its application to concrete and specific aspects of the category of supplies in question is consistent with the principle that exemptions or derogations must be interpreted restrictively (judgments of 6 May 2010, Commission v France, C‑94/09, EU:C:2010:253, paragraph 29, and of 5 September 2019, Regards Photographiques, C‑145/18, EU:C:2019:668, paragraph 43 and the case-law cited).

53However, the exercise of the possibility afforded to Member States to apply selectively the reduced rate of VAT is subject to the twofold condition, first, that they isolate, for the purposes of the application of that reduced rate, only concrete and specific aspects of the category of supply at issue and, secondly, that they comply with the principle of fiscal neutrality (judgment of 8 February 2024, Valentina Heights, C‑733/22, EU:C:2024:126, paragraph 44 and the case-law cited). Those conditions seek to ensure that Member States make use of that possibility only under conditions which ensure the correct and straightforward application of the reduced rate of VAT chosen and the prevention of any possible evasion, avoidance or abuse (judgments of 6 May 2010, Commission v France, C‑94/09, EU:C:2010:253, paragraph 30, and of 5 September 2019, Regards Photographiques, C‑145/18, EU:C:2019:668, paragraph 46 and the case-law cited).

54In the present case, as regards the first condition referred to in the preceding paragraph of the present judgment, it is necessary to determine whether the supplies of accommodation provided in hotels and similar establishments, for which German legislation provides for the application of a reduced rate of VAT, constitute concrete and specific aspects of the category of supplies listed in point (12) of Annex III to the VAT Directive. To that end, it is necessary to consider whether this involves supplies of services that are, as such, identifiable separately from the other services in that category (see, to that effect, judgments of 6 May 2010, Commission v France, C‑94/09, EU:C:2010:253, paragraph 35, and of 8 February 2024, Valentina Heights, C‑733/22, EU:C:2024:126, paragraph 45 and the case-law cited). Such identification presupposes the existence of objective, clear and precise criteria in the national legislation, determining precisely the supplies to which that legislation limits the application of the reduced rate of VAT (see, to that effect, judgment of 5 September 2019, Regards Photographiques, C‑145/18, EU:C:2019:668, paragraph 49 and the case-law cited).

55Subject to certain verifications which it is for the referring court to carry out, it is apparent from the information set out in the orders for reference that the Federal Republic of Germany, in exercising the discretion conferred on it under Article 98 of the VAT Directive, identified, on the basis of objective, clear and precise criteria, the concrete and specific supplies of the category of services listed in point (12) of Annex III to the VAT Directive, to which the reduced rate of VAT is applicable.

56It appears from that information that, in accordance with Paragraph 12(2)(11) of the UStG, adopted for the purpose of transposing Article 98(1) and (2) of the VAT Directive, a reduced VAT rate of 7% is to be applied to the renting of living quarters and bedrooms that an operator makes available for the short-term accommodation of third parties, as well as to the short-term renting of camping pitches, with the exception of supplies that are not directly used for the rental, even if the remuneration for those supplies is covered by the consideration for that rental.

57In addition, the first and second sentences of Paragraph 4 of Section 12.16 of the UStAE identify the supplies of services that are directly linked to short-term accommodation and which are, consequently, subject to the reduced VAT rate of 7%, namely the making available of furnished rooms and rooms equipped with other furnishings, such as a television set, a radio, a telephone or a safe, access to electricity, the making available of bed linen, towels and bathrobes, the cleaning of the rented rooms, the provision of personal hygiene tools, items for shoe cleaning and sewing kits, wake-up calls, the use of a shoe cleaning machine, and the accommodation of animals in the rented living quarters and bedrooms.

58Paragraph 5 of Section 12.16 of the UStAE contains a non-exhaustive list of the supplies that may not benefit from the reduced VAT rate of 7%, such as the making available of conference rooms, the making available of rooms for the exercise of a professional or commercial activity, the making available of places to park vehicles that has been agreed separately, the making available of non-static motorhomes, caravans, camping trailers, houseboats and yachts, transport in railway sleeping cars, the making available of cabins on ships used for transport, the arranging of accommodation services, turnover from pet boarding, and transfers of value for no consideration (for example, self-use of holiday apartments).

59Accordingly, it appears that that information is such as to make it possible to identify with certainty, as such, the supplies comprising the rental of living quarters and bedrooms that an operator makes available for the purpose of short term accommodation to third parties, which are subject to the reduced rate of VAT, and to distinguish them from other supplies provided in the context of that accommodation that come within the scope of point (12) of Annex III to the VAT Directive and are subject to the standard rate of VAT. Therefore, subject to the verifications to be carried out by the referring court, which alone has jurisdiction to interpret national law, the fact that they can be identified appears to meet the requirements set out in paragraph 54 of the present judgment, with the result that the first condition, namely that the concrete and specific aspects of the category of supplies at issue are isolated, is, subject to those verifications, satisfied.

60That conclusion is not called into question by the fact that it is apparent from the orders for reference that the supplies at issue in the main proceedings, the prices of which form part of a flat-rate overall price which includes the short-stay accommodation, constitute, from the customers’ point of view, supplies that are ancillary to that accommodation.

61It is clear from the Court’s case-law that, where a Member State has, in accordance with the principle of fiscal neutrality, exercised its discretion and isolated specific and concrete aspects of a category of supplies referred to in Annex III to the VAT Directive, there is no need to examine whether the supplies that are isolated and the supplies that are ancillary to them need or need not be regarded, from the point of view of an average consumer, as a single transaction, since that factor is not decisive for the exercise by Member States of the discretion granted to them by that directive as regards the selective application of the reduced rate of VAT on the basis of general and objective criteria (see, to that effect, judgment of 6 May 2010, Commission v France, C‑94/09, EU:C:2010:253, paragraphs 33 and 34).

62That interpretation is not called into question by the judgments of 18 January 2018, Stadion Amsterdam (C‑463/16, EU:C:2018:22) and of 4 May 2023, Finanzamt X (Permanently installed equipment and machinery) (C‑516/21, EU:C:2023:372), to which the referring court refers in its orders for reference.

63It is true that, in paragraph 36 of the judgment of 18 January 2018, Stadion Amsterdam (C‑463/16, EU:C:2018:22), the Court held that a single supply must be taxed solely at the rate applicable to that supply, that rate being determined according to the principal element of that supply. However, in the case that gave rise to that judgment, the Member State concerned had not exercised the discretion afforded to it by the VAT Directive by isolating, for the purpose of applying the reduced rate of VAT, concrete and specific aspects of the category of supplies at issue in that case. It was in those circumstances that the Court found it necessary to examine whether, where that discretion is not exercised, the supplies at issue in that case constituted a single supply from the point of view of the average consumer.

64In addition, in paragraph 34 of the judgment of 18 January 2018, Stadion Amsterdam (C‑463/16, EU:C:2018:22), the Court noted that, in order to determine whether the selective application of a reduced rate of VAT complied with Article 96 and Article 99(1) of the VAT Directive, the question whether a transaction including several elements must be considered to be a single supply was not decisive for the purpose of the exercise by the Member States of the discretion left to them by that directive as regards the selective application of the reduced rate of VAT. In paragraph 35 of that judgment, the Court also pointed out that the question that had been referred to it, namely the question as to whether a single supply comprised of two separate elements, one being the principal element and the other being ancillary, had to be subject solely to the rate of VAT applicable to the principal element, was different in nature to the question of the scope of that discretion, which was the subject of the case that gave rise to the judgment of 6 May 2010, Commission v France (C‑94/09, EU:C:2010:253).

65In that regard, there is no contradiction between the judgment of 18 January 2018, Stadion Amsterdam (C‑463/16, EU:C:2018:22) and the judgment of 6 May 2010, Commission v France (C‑94/09, EU:C:2010:253), which concern two different situations. The first concerns whether supplies ancillary to a principal supply must be subject to the standard rate of VAT applicable to that principal supply where the Member State concerned has not exercised the discretion conferred on it under Article 98 of the VAT Directive enabling it to isolate concrete and specific aspects of a category of supplies listed in Annex III to that directive. The second concerns a situation in which the Member State concerned has exercised that discretion.

66As regards the case which gave rise to the judgment of 4 May 2023, Finanzamt X (Permanently installed equipment and machinery) (C‑516/21, EU:C:2023:372), suffice it to note that, unlike the present cases, that case did not concern the selective application of a reduced rate of VAT to a category of supplies referred to in Annex III to the VAT Directive, but concerned the interpretation of Article 135(1)(l) and point (c) of the first subparagraph of Article 135(2) of that directive, which relate, respectively, to exempt transactions involving the leasing or letting of immovable property and to the transactions excluded from that exemption. In that case, the Court was thus called upon to rule on the exemptions from VAT and the exceptions to those exemptions, as provided for by the VAT Directive itself, and not, as in the present cases, on the scope of the discretion conferred on the Member States by that directive with regard to the selective application of the reduced rate of VAT.

67As regards the second condition referred to in paragraph 53 of the present judgment, which relates, in essence, to compliance with the principle of fiscal neutrality where a Member State chooses to apply the reduced rate of VAT selectively to certain concrete and specific aspects of the category of supplies listed in Annex III to the VAT Directive, the Court recalls that that principle precludes treating similar goods or supplies of services, which are thus in competition with each other, differently for VAT purposes (judgment of 9 September 2021, Phantasialand, C‑406/20, EU:C:2021:720, paragraph 37 and the case-law cited).

68According to settled case-law, in order to determine whether goods or services are similar, account must primarily be taken of the point of view of a typical consumer. Goods or services are similar where they have similar characteristics and meet the same needs from the point of view of consumers, the test being whether their use is comparable, and where the differences between them do not have a significant influence on the decision of the average consumer to use one or the other of those goods or services (judgment of 9 September 2021, Phantasialand, C‑406/20, EU:C:2021:720, paragraph 38 and the case-law cited).

69In other words, it is necessary to determine whether the goods and services at issue are interchangeable from the point of view of an average consumer. If that is the case, the application of different VAT rates might affect the consumer’s choice which, in turn, would indicate an infringement of the principle of fiscal neutrality (judgment of 9 September 2021, Phantasialand, C‑406/20, EU:C:2021:720, paragraphs 39 and the case-law cited).

70In addition, the Court notes that that principle cannot extend the scope of a reduced rate of VAT in the absence of clear wording to that effect (judgment of 9 March 2017, Oxycure Belgium, C‑573/15, EU:C:2017:189, paragraph 31).

71Consequently, for the purposes of examining the second condition referred to in paragraph 53 of this judgment, it is for the referring court to ascertain whether, taken in isolation, supplies of services such as the supplies at issue in the main proceedings, namely breakfast and/or access to parking spaces, gyms, wellness facilities and wi-fi networks, offered by a hotel or similar establishment where accommodation is being supplied, are, in the eyes of that average consumer, similar to those provided independently by another economic operator, with the result that they are interchangeable.

72Where they are interchangeable, the failure to apply selectively the reduced VAT rate of 7% to breakfast and/or the making available of parking spaces, gyms, wellness facilities and wi-fi networks, and treating them as being subject to the standard VAT rate, even though those supplies are provided as a supply ancillary to short-term accommodation and are included in a flat-rate overall price, would not infringe the principle of fiscal neutrality, to the extent that those supplies, provided independently by another economic operator, are also subject to the standard VAT rate.

73In that regard, the referring court takes the view that the separation requirement under the second sentence of Article 12(2)(11) of the UStG does not infringe the principle of fiscal neutrality, since it results in the same supply being taxed at the same rate, including where it is ancillary to short-term accommodation. According to that court, in order to comply with the principle of fiscal neutrality, a hotel may not, for example, offer breakfast and/or make available parking spaces, gyms, wellness facilities and wi-fi networks at a VAT rate that is more advantageous than that applicable to the same supplies provided in the immediate vicinity by an economic operator, such as a restaurant, a public car park operator or a sauna operator.

74In those circumstances and subject to the verifications which it is for the referring court to carry out as regards the considerations set out in paragraphs 71 and 72 of the present judgment, the Court finds that national legislation which, while specifying concrete and specific aspects of the category of supplies referred to in point (12) of Annex III to the VAT Directive to which a reduced rate of VAT may apply, makes it possible to separate from short-term accommodation supplies that are not directly used for that accommodation, such as the supplies at issue in the main proceedings, and to apply to them the standard VAT rate of 19%, even where they constitute supplies that are ancillary to that accommodation, does not appear to be incompatible with the principle of fiscal neutrality.

75In the light of all the foregoing considerations, the answer to the questions referred is that Article 98(1) and (2) of the VAT Directive, read in conjunction with point (12) of Annex III to that directive, must be interpreted as not precluding national legislation which excludes from the scope of the reduced VAT rate applicable to short-term accommodation services provided in hotels and similar establishments supplies which are not directly used for that accommodation, such as the making available of parking spaces, a gym and wellness facilities, as well as access to the hotel’s wi-fi network and the provision of breakfast, even though they could be regarded as being ancillary to that accommodation due to the fact that the remuneration for them is covered by the flat-rate overall price paid for all the services supplied in the context of that accommodation, provided that those rules make provision for the reduced rate to be applied to concrete and specific aspects of the categories of accommodation services referred to in point (12) of Annex III to that directive and that the principle of fiscal neutrality is complied with.

Costs

76Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the referring court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable.

Operative part

On those grounds, the Court (Fourth Chamber) hereby rules:

Article 98(1) and (2) of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax, read in conjunction with point (12) of Annex III to that directive,

must be interpreted as not precluding national legislation which excludes from the scope of the reduced rate of value added tax applicable to short-term accommodation services provided in hotels and similar establishments supplies which are not directly used for that accommodation, such as the making available of parking spaces, a gym and wellness facilities, as well as access to the hotel’s wi-fi network and the provision of breakfast, even though they could be regarded as being ancillary to that accommodation due to the fact that the remuneration for them is covered by the flat-rate overall price paid for all the services supplied in the context of that accommodation, provided that those rules make provision for the reduced rate to be applied to concrete and specific aspects of the categories of accommodation services referred to in point (12) of Annex III to that directive and that the principle of fiscal neutrality is complied with.

Signatures

[Signatures]

Notes

* Language of the case: German.

OPINION OF ADVOCATE GENERAL

ĆAPETA

delivered on 25 September 2025 ¹

(Reference for a preliminary ruling – Value added tax (VAT) – Directive 2006/112/EC – Accommodation in hotels and similar establishments – Reduced rate of VAT – Services ancillary to the accommodation)

I. Introduction

Introduction

1Must breakfast, or other ancillary services offered by hotels and similar establishments that provide short-term accommodation, be taxed separately from the supply of accommodation, or could it, as an ancillary service, be taxed at the same, lower rate as the principal supply?

2That is essentially what is at issue in the three joined requests for a preliminary ruling submitted to the Court by the XI Chamber of the Bundesfinanzhof (Federal Fiscal Court, Germany, ‘the BFH’).

II. The background to the proceedings, the questions referred and the procedure before the Court

3Those three cases for which three preliminary rulings have been requested, question the compatibility of Paragraph 12(2)(11) of the German Umsatzsteuergesetz (Law on Turnover Tax; ‘the UStG’) ² with the VAT Directive. ³

4Under that provision, the German legislature fixed a reduced tax rate, within the meaning of Article 98(1) and (2) of the VAT Directive, for services listed in Annex III to that directive, in particular, for the provision of services in Point 12 of that annex.

5The first sentence of Paragraph 12(2)(11) of the UStG sets a reduced tax rate on the provision of short-term accommodation and campsites. However, the second sentence thereof limits the application of that reduced rate to the provision of accommodation for the purpose of letting. It reads: ‘The first sentence shall not apply to supplies of goods and services which are not directly used for the letting, even if they are covered by the rental charge.’

6The BFH asks, in essence, whether the VAT Directive precludes a national provision limiting the application of the reduced rate with regard to short-term accommodation to the principal supply, but excluding dependant ancillary supplies from the possibility of benefiting from that reduced rate.

7The facts in the three litigations, which resulted in the current proceedings, are the following.

Case C‑409/24

8J-GmbH, the applicant in the main proceedings, operated a hotel and restaurant. In addition to accommodation, hotel guests could also have breakfast, which was separately charged at EUR 4.50 if a guest opted for room only. Additionally, the hotel and restaurant had its own car park, which could be used free of charge.

9Since June 2018, the applicant in the main proceedings had been applying a reduced tax rate of 7% to accommodation, breakfast and parking, treating them all as a single supply.

10Following two tax audits carried out at the applicant’s premises for the months of April to June 2018 and July 2018 to May 2019, the tax auditors and Finanzamt K (Tax Office K) determined that breakfast and parking should be taxed at the standard rate of 19%, arguing that they are separate, independent services, not ancillary to accommodation. That determination led to higher tax assessments with respect to the hotel.

11J-GmbH appealed against those assessments to the Sächsisches Finanzgericht (Finance Court, Saxony, Germany), which dismissed the appeal, agreeing with Tax Office K in its ruling that breakfast and parking were independent services. Even if they were to be considered ancillary supplies, they would still be excluded from the reduced tax rate under Paragraph 12(2)(11) of the UStG.

12J-GmbH then lodged an appeal before the BFH, arguing that that national provision, requiring the breakdown of services for tax purposes, is not compatible with EU law. The applicant in the main proceedings considers that the judgment of 18 January 2018, Stadion Amsterdam, ⁴ prohibits the artificial splitting of principal and ancillary supplies, and therefore persists in its assertion that breakfast and parking should be taxed at the reduced rate of 7%.

13Tax Office K maintained its stance, arguing that breakfast and parking are independent services and that the judgment cited by the hotel owner is not applicable in this case. In support of its argument, that tax office referred to another judgment of the Court, of 6 May 2010, Commission v France, ⁵ which, in its view, acknowledged that national breakdown requirements are permissible.

14The case was stayed pending a decision from the Court in another case, that of Finanzamt X (Permanently installed equipment and machinery). Following the Court’s judgment in that case on 4 May 2023, ⁶ J-GmbH believed its position to be confirmed, as the Court rejected the artificial splitting of single supplies. However, Tax Office K argues that the judgment in Finanzamt X is irrelevant and that its interpretation of national law, which allows for the breakdown of services, is still valid under EU law.

15While the BFH agrees with the Sächsisches Finanzgericht (Finance Court, Saxony) that breakfast constitutes an independent service excluded from the benefit of the reduced rate under Paragraph 12(2)(11) of the UStG, the referring court nonetheless considers that the provision of parking spaces is a service ancillary to the supply of accommodation, since the former is inextricably linked to the latter.

Case C‑410/24

16In 2013, D, the applicant in the main proceedings, operated a guesthouse. It offered guests accommodation and breakfast at an all-inclusive price; guests could not opt out of breakfast. In respect of the supplies provided, the applicant issued invoices showing gross amounts for accommodation including breakfast. Rates or amounts of tax were not shown.

17In the turnover tax return filed with Finanzamt F (Tax Office F) for that year, the applicant declared both services, one at a reduced rate of 7% and the other at the standard rate of 19%.

18Following the judgment in Stadion Amsterdam, D, by letter dated 19 December 2018, requested that the tax assessment be amended in accordance with Paragraph 164(2) of the Abgabenordnung (Tax Code). As grounds for that request, D relied on the fact that all turnover generated in conjunction with the guesthouse is to be subject to the reduced tax rate of 7%.

19Tax Office F rejected the request for amendment by notice of 8 February 2019. After a failed internal appeal, D brought an action against that rejection.

20At first instance, the Hessisches Finanzgericht (Finance Court, Hesse) dismissed the action, considering that the breakfast service provided by D was not subject to the reduced tax rate, but instead to the standard rate laid down in Paragraph 12(1) of the UStG. ⁷

21By its appeal before the BFH, D submits that breakfast is a dependent supply ancillary to the provision of accommodation. Guests who did not take breakfast also paid the full price, with one single exception. ⁸ The breakdown requirement laid down in the second sentence of Paragraph 12(2)(11) of the UStG would, according to D, not be permissible following the Court’s judgment in Stadion Amsterdam, because a single supply of services must be subject to a single tax rate which is determined on the basis of the principal supply. Nothing to the contrary would follow from Article 98 of the VAT Directive, which provides for the right of Member States to apply reduced rates.

22Tax Office F requests that the appeal on a point of law be dismissed as unfounded.

23That tax office refutes D’s submissions by claiming that, in Finanzamt X, the Court did not have to rule on a national breakdown requirement, since point (a) of the first subparagraph of Paragraph 4(12) of the UStG, in conjunction with the second subparagraph thereof, does not lay down such a requirement. It is, however, laid down in the second sentence of Paragraph 12(2)(11) of the UStG. That judgment cannot therefore be applied analogously to the reduced rate under Paragraph 12(2)(11) of the UStG. Since the breakdown requirement laid down in the second sentence of Paragraph 12(2)(11) of the UStG supersedes the principle of a single supply, it is irrelevant whether the breakfast service at issue is to be assessed as an ancillary service or as an independent one.

Case C‑411/24

24In 2011, D GmbH & Co. KG operated hotels A and B. Both hotels had a car park, including spaces for motor vehicles. Guests staying at the hotels, as well as the public, could use those spaces without being charged separately. In addition to accommodation and parking, the applicant offered a wireless local area network (Wi-Fi), and one of the hotels had fitness and wellness facilities; neither was subject to a separate charge.

25In its turnover tax return for that year, D GmbH & Co. KG declared the supply of goods and services both at the standard rate of 19% and the supply of goods and services at the reduced rate of 7%. It took the view that the provision of parking spaces was a supply ancillary to the provision of accommodation that was subject to reduced taxation.

26Finanzamt A (Tax Office A) did not share that view and, consequently, issued a turnover tax assessment notice subject to review for 2011.

27D GmbH & Co. KG appealed, requesting taxation in accordance with its return, claiming that the provision of parking spaces free of charge is a supply ancillary to the supply of accommodation which, like the latter, should be subject to the reduced rate.

28Following a tax audit in 2011 at the applicant’s premises, the auditor held that the standard rate was applicable to the provision of the parking spaces and also to that of the Wi-Fi network and the fitness and wellness facilities.

29Tax Office A followed the auditor’s opinion and issued a turnover tax amendment notice for the year at issue, on 21 November 2018. This amendment notice was also appealed. By its decision of 30 July 2019, Tax Office A rejected the applicant’s appeal as unfounded.

30The competent Finanzgericht (Finance Court, Germany) dismissed the action with a reasoning comparable to that given by the Hessisches Finanzgericht (Finance Court, Hesse) in Case C‑410/24.

31By its appeal before the BFH, D GmbH & Co. KG submits that there have been various infringements of law. The applicant maintains, first, that the Finanzgericht (Finance Court) erred in law in classifying the provision of Wi-Fi, parking spaces and fitness and wellness facilities as a service for consideration within the meaning of Paragraph 1(1)(1) of the UStG; second, that that court failed to recognise that the additional services are directly used for letting, within the meaning of the second sentence of Paragraph 12(2)(11) of the UStG; and, third, that said court did not take account of the principle of a single supply as recognised by EU law.

32While D GmbH & Co. KG recognises that the Court of Justice held, in in Commission v France, that Article 98 of the VAT Directive authorises Member States to apply reduced rates selectively to certain aspects of a particular category listed in Annex III to that directive, that case-law would not constitute a restriction on the principle of a single supply arising from Article 2 of that directive. It is similarly apparent from the Court’s judgment in Stadion Amsterdam that the average consumer will assume that all additional supplies are attributable to the letting of a hotel room as the clearly dominant principal supply. According to the case-law of the Court, this would require applying the reduced rate, applicable to the letting of a hotel room, to those additional supplies as well.

33D GmbH & Co. KG therefore seeks an order setting aside the preliminary decision, the appeal decision of 30 July 2019 and the turnover tax amendment notices for 2011.

34Tax Office A requests that the appeal on a point of law be dismissed as unfounded.

35That office defends the contested preliminary decision, arguing, inter alia, that the provision of Wi-Fi, parking spaces and fitness and wellness facilities is not to be regarded as a service directly used for letting. Those supplies would, in line with the German legislature’s intention expressed in the breakdown requirement, not be subject to the reduced tax rate.

36The case in the main proceedings was also stayed due to the litigation before the Court of Justice in the Finanzamt X case.

37Following that judgment, D GmbH & Co. KG believes its view of the law has been confirmed. If applied to the present case, the ancillary supplies at issue must also be subject to the reduced rate provided for in Paragraph 12(2)(11) of the UStG.

38Tax Office A refutes this by claiming that the Court’s judgment in Finanzamt X cannot be applied to the matter under examination for reasons identical to those stated by Tax Office F in Case C‑410/24.

The referring court’s grounds for referring those three cases to the Court of Justice

39As it explains in its orders for reference, the BFH was initially convinced that the breakdown requirement under Paragraph 12(2)(11) of the UStG was compatible with EU law because, under Article 98(1) and (2) of the VAT Directive, Member States may apply a reduced rate of VAT only to concrete and specific aspects of a category of supplies listed in Annex III to that directive, provided that they comply with the principle of fiscal neutrality inherent in the common system of VAT.

40In the referring court’s initial view, under Paragraph 12(2)(11) of the UStG, services not directly related to accommodation, such as the provision of parking spaces free of charge (Cases C‑409/24 and C‑411/24), of breakfast (Case C‑410/24) and of a local wireless internet network and fitness and wellness facilities, also free of charge (Case C‑411/24), must be taxed separately and at the standard rate. That position was based on the belief that EU Member States have the discretion to apply reduced VAT rates selectively to specific aspects of the category of supplies listed in Annex III to the VAT Directive, provided that fiscal neutrality is maintained. The referring court considered that the breakdown requirement actually prevents distortion of competition by ensuring that a hotel’s ancillary services are taxed at the same rate as those offered by standalone businesses (for example, a car park operator).

41However, as that court explains, recent case-law of the Court has cast doubt over the referring court’s belief in the correctness of its conclusions. While the BFH initially believed that the judgments in Commission v France, Stadion Amsterdam and Finanzamt X, for example, did not fundamentally alter the permissibility of selective reduced rates, a specific statement in paragraph 33 of Stadion Amsterdam has cast serious doubt on the matter. That paragraph suggests that a single supply comprising both a principal and an ancillary element, which would otherwise be subject to different VAT rates if supplied separately, must be taxed solely at the rate applicable to the principal element. The BFH is now concerned that this could imply that differing VAT rates for components of a single supply are prohibited under EU law, potentially meaning that ancillary services should also benefit from the reduced rate when they are part of a single supply of accommodation, overriding the national breakdown requirement.

42The BFH further points out that there is a difference of opinion within Germany. Some finance courts and academics support the initial view of the BFH on the compatibility of the breakdown requirement, while a growing number believe that the reduced rate should extend to ancillary accommodation services based on the principle of a single supply. Given these profound and unresolved doubts, and the fact that the judgment in Finanzamt X did not dispel those doubts in the specific context of ancillary services offered at hotels, the BFH has decided to seek a definitive ruling from the Court of Justice on whether EU law allows the breakdown requirement as imposed by the national law at issue.

43To dispel its doubts, the Bundesfinanzhof (Federal Fiscal Court) decided to stay the proceedings and to refer three almost identical questions, broken down into one, to the Court of Justice for a preliminary ruling:

‘Are Article 24(1) and Article 98(1) and (2) of [the VAT Directive], read in conjunction with Point 12 of Annex III thereto, to be interpreted as meaning that they preclude a national provision such as the second sentence of Paragraph 12(2)(11) of the [UStG], under which a Member State may exclude, by means of a national requirement to break down transactions for tax purposes, supplies from the reduced tax rate provided for by the Member State for the letting of living and sleeping spaces offered by a trader for the short-term provision of accommodation to strangers, which supplies do not directly serve the letting purpose but are remunerated by the consideration for such letting, even if those supplies are dependent supplies ancillary to the short-term provision of accommodation to strangers, such as[:]

(only) the provision of parking spaces as in [Case C‑409/24;]

the supply of breakfast as in [Case C‑410/24;]

the provision of parking spaces, [of] fitness and wellness facilities and of the hotel’s own wireless local network (Wi-Fi network) as in [Case C‑411/24]?’

44Pursuant to point 18 of the Court of Justice’s ‘Recommendations to national courts and tribunals in relation to the initiation of preliminary ruling proceedings’, ⁹ inviting national courts to briefly state their view on the answer to be given to the questions referred for a preliminary ruling, the BFH indicates in its orders for reference that, in its view, national legislation, such as the UStG which, in Paragraph 12(2)(11) thereof, requires ancillary hotel services to be taxed separately and at the standard rate, is compatible with EU law, even when those services form part of a single supply with regard to accommodation.

45The referring court bases its opinion on its interpretation of specific judgments of the Court, namely those of 22 September 2022, The Escape Center (C‑330/21, The Escape CenterEU:C:2022:719,) and of 8 February 2024, Valentina Heights (C‑733/22, Valentina HeightsEU:C:2024:126,). While the judgment in The Escape Center acknowledged that coaching linked to sports facilities could be part of a single supply subject to a reduced rate, the BFH emphasises that that judgment, citing earlier cases like Commission v France and Phantasialand, ¹⁰ re-affirmed that Member States may limit reduced VAT rates to ‘concrete and specific aspects’ of a supply category, as long as the principle of fiscal neutrality is complied with.

46The BFH interprets this to mean that, even when there is a single supply, selective application of the reduced rate remains permissible provided it does not distort competition. That court is of the view that the breakdown requirement in Paragraph 12(2)(11) of the UStG precisely favours competition by preventing hotels from offering services like breakfast or parking at a lower VAT rate than a competing standalone restaurant or car park. The BFH further finds support for its view in Valentina Heights, which confirmed that Member States may selectively apply reduced rates on the two-fold condition that such an application both targets concrete and specific aspects of a supply category and adheres to fiscal neutrality.

The procedure before the Court of Justice

47By decision of 15 July 2024, the President of the Court of Justice joined Cases C‑409/24, C‑410/24 and C‑411/24.

48Written observations were submitted to the Court by the German Government and the European Commission.

49Although the German Government submitted a reasoned request for a hearing, pursuant to Article 76(1) of the Rules of Procedure of the Court of Justice, the Court considers that it has sufficient information available to it from the material in the file and decides, pursuant to that article, not to hold a hearing.

III. Analysis

50By its questions, fundamentally identical across all three cases, the referring court asks, in essence, whether Article 24(1) and Article 98(1) and (2) of the VAT Directive, read in conjunction with Point 12 of Annex III thereto, must be interpreted as meaning that they preclude a national provision under which lodging establishments are required to tax services at the standard rate and separately from the short-term accommodation, which benefits from a reduced rate, even if those services are a dependant supply ancillary to that short-term accommodation.

51At the outset, it must be recalled that the VAT Directive recognises only two kinds of supply, that is, the supply of goods and the supply of services. Article 24 of that directive applies to the latter.

52With regard to the supply of services, Article 98 of the VAT Directive provides for the right of Member States to apply a reduced rate for specific supplies listed in Annex III to that directive. Point 12 of that annex provides for such a possibility for ‘accommodation provided in hotels and similar establishments, including the provision of holiday accommodation and the letting of places on camping or caravan sites’.

53Paragraph 12(2)(11) of the UStG states the same in its first sentence. However, the second sentence of that provision, which is at issue in all three cases here, limits the application of a reduced rate only to services of accommodation, requiring that other supplies not directly used for letting be taxed separately, even if they are paid for as part of a single remuneration for accommodation.

54The litigations pending before the referring court concern different ancillary services that are connected to short-term accommodation, such as breakfast, parking, access to the fitness and wellness centre and the provision of Wi-Fi.

55I would like to make some preliminary remarks concerning those supplies and the scope of the VAT Directive (A), before assessing the referring court’s question (B).

A. Preliminary remarks

56It is questionable whether all the circumstances in the three proceedings before the referring court actually constitute taxable transactions under the VAT Directive.

57On the one hand, it could be argued that the consideration for those ancillary services is integrated within the general consideration for the supply of accommodation.

58Indeed, it is settled case-law that the circumstance that a single price is invoiced, or that separate prices were contractually stipulated, has no decisive significance for the purposes of determining whether it is necessary to find that there are two or more distinct and independent transactions or only a single economic transaction. ¹¹

59However, on the other hand, the referring court found that parking (Cases C‑409/24 and C‑411/24), access to the fitness and wellness centre and Wi-Fi (Case C‑411/24) were offered free of charge (‘kostenfrei’ or ‘kostenlos’ in German).

60Pursuant to Article 2(1)(c) of the VAT Directive, a taxable operation involves only transactions which consist of a ‘supply of services for consideration within the territory of a Member State by a taxable person acting as such’.

61Therefore, subject to final verifications by the referring court, the supplies at issue in Cases C‑409/24 and C‑411/24, whether ancillary or not, could not be considered a supply of services, within the meaning of the VAT Directive, if they are not provided for consideration. ¹²

62In other words, where services ancillary to the letting of accommodation are offered free of charge, the question regarding the appropriate rate of taxation does not arise, as those transactions are not taxable transactions if they are not offered for consideration.

63Consequently, I will respond to the questions of the referring court on the premiss of Case C‑410/24, which concerns the provision of breakfast, consideration for which has been clearly identified.

B. Assessment of the question

64The circumstances in Case C‑410/24 are indicative of where the referring court has doubts, on account of the fact that the lodging establishment operates on an all-inclusive basis – bed and breakfast, for which the consideration of the breakfast, though identified, cannot be opted out of by the guests.

65The consequence of the German law at issue is that, even if bed and breakfast may be understood by a consumer as a single composite supply, the services of which it is composed are split for VAT purposes. The German legislature thus decided to reduce the VAT rate only for the short-term accommodation (bed), and not for any ancillary service (breakfast).

66The applicants in the cases before the referring court submit that provision of services ancillary to short-term accommodation should equally be subject to the reduced rate.

67The Commission is also of the view that services provided in addition to accommodation must, given their ancillary nature, be taxed at the same rate as the principal supply.

68The main reason behind such an argument lies in the circumstance that the contractual arrangements, such as breakfast in Case C‑410/24, are not optional.

69By contrast, the German Government considers that the VAT Directive does not preclude the requirement under national law for those services to be separated for VAT purposes, even if booking a room with breakfast included is the only option available to customers.

70To start with, it should be recalled that the principle under the VAT Directive, as stated in the second subparagraph of Article 1(2) and in Article 2 of that directive, is that every transaction must normally be regarded as being distinct and independent. ¹³

71However, there are certain exceptions to that rule, such as single complex supplies and dependent ancillary supplies. ¹⁴ As with all exceptions, those must be interpreted strictly. ¹⁵

72While it is true that Member States must, when deciding which specific supplies should benefit from the reduced VAT rate, take into account the exceptions to the principle of independent taxation of each transaction, the question whether a certain supply represents an ancillary one, in order for it not to be separated from the principal supply for taxation purposes, must be examined on a case-by-case basis. ¹⁶

73In the particular case at issue, I am of the opinion that the VAT Directive does not preclude national legislation such as Paragraph 12(2)(11) of the UStG.

74In Commission v France, ¹⁷ the Court considered that the prerogative of Member States to introduce reduced rates is subject to a twofold condition: first, to isolate for that purpose only concrete and specific aspects of the category of supply at issue and, second, to comply with the principle of fiscal neutrality. ¹⁸ Subsequent case-law, including, as I will explain, Stadion Amsterdam, does not affect those conditions nor the prerogative of Member States to introduce a reduced rate only for part of the composite supply.

75I am of the view that the German legislation at issue respects both conditions and is thus not contrary to Article 98(1) and (2) of the VAT Directive.

76In the first place, the breakdown requirement introduced by the German legislation at issue is in line with the meaning and scope of Article 98(1) and (2) of the VAT Directive.

77That provision enables Member States to choose to apply the reduced VAT rate to certain types of supply, and to do so for different reasons.

78It is clear that the rationale behind the reduced rate for the short-term accommodation industry lies in the support for tourism. ¹⁹

79Given that people who travel also need to eat, one may consider that reduced VAT rates on breakfast might also be beneficial to favour tourism. However, the German legislature did not opt for reduced VAT rates for the supply of breakfast. Under Annex III to the VAT Directive (Point 12a of that annex), Member States may opt for reduced rates for food supplies. A number of Member States indeed apply a reduced rate for the supply of food, such as breakfast. ²⁰ However, that was not the case in Germany at the time. ²¹

80On a side note, the use of facilities such as fitness and wellness centres could equally qualify for a reduced rate, but few Member States appear to have used discretion in that area. ²²

81My point is that, theoretically, the different supplies concerned in the main proceedings might all qualify for a reduced rate, and such reduced rates might benefit tourism.

82However, the German legislature clearly opted for the reduced rate only with respect to accommodation, even if it acknowledged that there are ancillary services offered within such a supply, and that sometimes the single price is offered to customers for both the accommodation and any ancillary services. Therefore, the German legislature exercised its discretion in applying reduced rates of VAT to only concrete and specific aspects of the category of supply of short-term accommodation.

83The judgment in Stadion Amsterdam does not affect the conclusion that breakfast can be treated as a separate supply for VAT purposes, even if it represents an ancillary service to accommodation. That case concerned the VAT treatment of a ‘World of Ajax’ tour package, which included a tour of the main stadium in Amsterdam and free admission to the AFC Ajax museum. The relevant legal question was whether those two elements should be treated as a single, indivisible supply for VAT purposes, or as two separate supplies with different VAT rates. The stadium operator, Stadion Amsterdam, had applied the reduced VAT rate to the entire package, but the Dutch tax authorities believed only the museum visit should qualify for it.

84The Court reviewed its established case-law on composite supplies, which holds that a transaction consisting of several elements should not be artificially split. ²³ It then considered whether the two services were so closely linked that they constituted a single, economically indivisible supply from the perspective of the average consumer. It reasoned that a consumer would view the stadium tour and the museum visit as a single package, with the latter being a natural and integral part of the overall experience. Therefore, it concluded that the transaction was a single supply of services. ²⁴

85In the present case, it cannot be stated that accommodation and breakfast represent an indivisible supply. ²⁵ After all, many hotels offer those two services separately. Even if, in the eyes of a consumer, accommodation that does not offer the possibility to opt out of breakfast may therefore be seen as a single supply, it is not a sufficient reason to prevent the national legislature from narrowing down the reduced rate to an identifiable and separable supply. In Stadion Amsterdam there was no prerogative for the national legislature to confine reduced VAT to a single element of a composite supply, unlike in the present case. ²⁶

86In the judgment in Finanzamt X, which was also mentioned by the parties to the main proceedings, the Court was asked to rule on the VAT exemptions provided for by the VAT Directive itself, not on reduced rates applied by Member States to certain services on the basis of the discretion left by that directive, as in the present case. Nevertheless, that case also concerned the question whether a composite transaction, but single from an economic point of view – consisting, on the one hand, of the exempted services that made up the principal supply and, on the other hand, of ancillary services that were taxable services on the basis of the exception to exemption from VAT – should be split for VAT purposes. In that case, the Court considered that the ancillary services are inseparable from that principal supply and that in such a case the former follows the tax treatment of the latter. ²⁷

87In the present case, as already stated, the ancillary supply is not inseparable from the principal supply. Furthermore, the decision as to which should be subject to reduced tax is at the discretion of Member States, unlike the exemption from VAT, which is harmonised by the VAT Directive and leaves no choice to Member States.

88The German legislation at issue clearly specified which particular aspect of a complex supply it would apply a reduced VAT rate to. Accommodation can be clearly separated and identified with regard to other ancillary supplies, such as breakfast, access to a fitness and wellness centre, Wi-Fi or parking. Furthermore, those ancillary supplies are not indispensable or inseparable from the supply of accommodation. Therefore, even if it is possible that consumers might view the entire package as a single supply, this does not prevent national legislation, such as that at issue in the present case, from insisting on the separate treatment of those supplies for VAT purposes.

89In the second place, the German legislation at issue is in conformity with the principle of fiscal neutrality.

90That cardinal principle in the VAT system precludes, in particular, economic operators carrying out the same transactions from being treated differently in relation to the collection of VAT. ²⁸

91In that regard, I agree with the referring court that the proposed solution promotes fiscal neutrality. It prevents lodging establishments from being given an unfair advantage over other operators offering comparable services, such as bars, brasseries, car parks, wellness centres, internet cafés, and so on. If breakfast were taxed at the same reduced rate as accommodation in a hotel, other establishments offering that same service would be placed in a disadvantaged position, as the breakfast they offer would be subject to the standard rate.

92Therefore, the German legislation at issue also satisfies the second condition for introducing the reduced VAT rate, as it complies with the principle of fiscal neutrality.

93For the above reasons, I am of the view that Article 98(1) and (2) of the VAT Directive, read in conjunction with Point 12 of Annex III thereto, must be interpreted as meaning that it does not preclude a national provision under which lodging establishments are required to tax services, such as breakfast, at the standard rate and separately from the short-term accommodation, which benefits from a reduced rate, even if those services are a dependant supply ancillary to that short-term accommodation.

IV. Conclusion

Conclusion

94In the light of the foregoing, I propose that the Court of Justice answer the question referred by the Bundesfinanzhof (Federal Fiscal Court, Germany) as follows:

Article 98(1) and (2) of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax, read in conjunction with Point 12 of Annex III thereto,

must be interpreted as meaning that it does not preclude a national provision under which lodging establishments are required to tax services, such as breakfast, at the standard rate and separately from the short-term accommodation, which benefits from a reduced rate, even if those services are a dependant supply ancillary to that short-term accommodation.

¹ Original language: English.

² Of 21 February 2005 (BGBl. 2005 I, p. 386).

³ Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax (OJ 2006 L 347, p. 1; ‘the VAT Directive’), in the version applicable to the dispute in the main proceedings.

⁴ C‑463/16, ‘Stadion Amsterdam’, EU:C:2018:22.

⁵ C‑94/09, Commission v France, EU:C:2010:253.

⁶ C‑516/21, ‘Finanzamt X’, EU:C:2023:372.

⁷ To do so, that court opined that the reduced tax rate laid down in the first sentence of Paragraph 12(2)(11) of the UStG is limited to the supply of letting or accommodation. The second sentence of that provision lays down a requirement to break down, for tax purposes, the supply of services not directly used for letting (‘the breakdown requirement’). The principle that a (dependent) ancillary supply shares the tax treatment of the principal supply is, according to that court, superseded by this breakdown requirement. This is consistent with EU law because, under Article 98(1) and (2) of the VAT Directive, Member States may apply a reduced rate of VAT to (only) concrete and specific aspects of a category of supply as set out in Annex III to that directive, provided that the principle of fiscal neutrality inherent in the common system of VAT is observed. The fact that an all-inclusive price was agreed in the case at issue does not give rise to any other assessment.

⁸ The order for reference alludes to that exception twice without providing further explanation.

⁹ OJ C, C/2024/6008, p. 1.

¹⁰ Judgment of 9 September 2021 (C‑406/20, EU:C:2021:720).

¹¹ See, to that effect, judgments of 25 February 1999, CPP (C‑349/96, EU:C:1999:93, paragraph 31 and the case-law cited), and of 26 May 2016, Bookit (C‑607/14, EU:C:2016:355, paragraph 26 and the case-law cited).

¹² That was indeed the argument submitted by D GmbH & Co. KG in its appeal before the BFH in the litigation in the main proceedings in Case C‑411/24.

¹³ See the recent judgment of 1 August 2025, Határ Diszkont (C‑427/23, EU:C:2025:596, paragraph 37 and the case-law cited).

¹⁴ Those exceptions were explained in detail in the Opinion of Advocate General Kokott in Frenetikexito (C‑581/19, EU:C:2020:855, point 21 et seq.).

¹⁵ See, to that effect, Commission v France, paragraph 29, as well as judgments of 9 November 2017, AZ (C‑499/16, EU:C:2017:846, paragraph 24 and the case-law cited), and of 5 September 2019, Regards Photographiques (C‑145/18, EU:C:2019:668, paragraph 43).

¹⁶ Commission v France, paragraphs 32 and 33.

¹⁷ In that judgment, the national legislation at stake concerned a reduced VAT rate for certain funeral services, namely transportation of the deceased. The Commission considered that all the services and goods supplied by undertakers, such as the management of funeral homes, embalming, the organisation of funerals and similar, constitute, together with the transportation of the deceased, a single complex transaction for the purposes of VAT, which must, consequently, be subject to a single rate of tax. However, the Court ultimately rejected the Commission’s infringement application, holding that the French Republic had not infringed the VAT Directive because the services in question, such as the transportation of the deceased, could be considered a distinct supply from the overall funeral service. That was so despite the fact that funeral services might be understood as a single service in the eyes of a consumer.

¹⁸ Commission v France, paragraph 30.

¹⁹ Tosi, L. and Bagarotto, E.-M., ‘Access Fees to Cultural Heritage Cities: Way to Promote Sustainable Tourism?’World Tax Journal, 2021, 283-307, pp. 290 (acknowledging that although most Member States have used that discretion, that consideration still applies to avoid any comparative advantage).

²⁰ European Commission, VAT rates applied in the Member States of the European Union – Situation at 1st January 2020, Taxud.c.1(2020), p. 5.

²¹ The Federal Republic of Germany does not appear to apply that reduced rate to the provision of meals in restaurants, with the exception of during the COVID-19 pandemic, even though the German Government is now contemplating securing the reduced rate from 1 January 2026; https://www.vatcalc.com/germany/germany-rolls-over-hospitality-vat-rate-cut-to-7-into-2023/.

²² European Commission, op. cit., p. 5.

²³ Stadion Amsterdam, paragraph 22.

²⁴ Stadion Amsterdam, paragraphs 23 to 25. Ultimately, the Court ruled that since the stadium tour was the principal element of the ‘World of Ajax’ package and the museum visit was ancillary, the entire package should be subject to the VAT rate applicable to the principal supply.

²⁵ On that matter, see also point 21 of and footnote 8 to the present Opinion.

²⁶ See, to that effect, Stadion Amsterdam, paragraph 35.

²⁷ Finanzamt X, paragraph 38.

²⁸ See the recent judgment of 1 August 2025, Galerie Karsten Greve (C‑433/24, EU:C:2025:600, paragraphs 35 and 41 and the case-law cited).