Brussels Court of Appeal refuses VAT deduction on catering costs despite reckoning

The judgment concerns a company whose activity is the organisation of events, shows and exhibitions. For the organisation of (e.g.) an event, it issues one global sales invoice; the invoice relates to both the recharging of the catering costs and the other services provided by the company (e.g. event coordination, set-up, sound, etc.).

As the company integrally passes on catering costs to its customers, the company deducts 100% of the VAT on the purchase of catering costs (as a subcontractor). However, during a VAT inspection, this right to deduct VAT is refused.

The VAT inspector hereby argues that the VAT on catering costs is only deductible in this situation if the company can prove that it incurred the costs and in turn provided the same services for a consideration. The catering costs must therefore be re-invoiced as a separate service. However, according to the VAT auditor, this is a single, complex service and the catering services cannot be seen as a separate service. Consequently, the above condition is not met and the VAT is not deductible.

The Court of Appeal decides to follow the argument of the VAT auditor. The Court adds that the purchase act of the company consists of, inter alia, a catering service, and the sales act consists of the organisation of an event. The catering cost is only one element of the cost of the overall complex service provided by the company. In addition, the Court points out that the catering services are charged together with an organisation and agency fee. In other words, the company provides one overall service, whereby the organisation of the event is the main activity and the catering services are merely incidental. The fact that the catering services are listed separately on the invoice does not change this.

The above ruling has an impact; VAT on catering costs passed on as part of an overall fee for organising an event is not deductible.

If your company has taken similar actions, we recommend checking whether you are impacted. That way, you will have an idea of the risk and can consider whether a spontaneous rectification is desirable. As a reminder; the normal limitation period is three calendar years following the year in which the VAT became due. From 2025, the VAT administration can in principle go back to 2022 to demand rectification (unless there is e.g. fraud).

Our PKF BOFIDI experts are at your service

If required, the VAT team can examine the impact of the above ruling on your company and possibly check the situation with the local VAT administration. Please contact our experts for more information.