Circular 2018/C/84 on the VAT exemption for sports
The FPS Finance recently issued a circular stating that activities with a non-negligible physical component are sports and therefore fall under the exemption of the VAT Code on the VAT exemption for sports [1]. In other words, the tax authority uses a new definition of sport. From January 1, 2019, bridge and chess will not be considered a sport for the purposes of VAT. This was the result of a recent judgment by the Court of Justice.
The English Bridge Union and the ECJ
In the judgment of 26 October 2017, the Court of Justice provided a definition regarding the concept of sport within the meaning of Article 132(1)(m) of the VAT directive [2]. This judgment followed a discussion between the English Bridge Union and the United Kingdom tax authorities. The discussion concerned the question of whether or not bridge was a sport for VAT purposes.
The Opinion of Advocate General SZPUNAR[3] compared what is treated as sport by tax authorities in different Member States. The conclusion was that there was no uniformity. While competitive bridge is a sport in Belgium, Denmark, France, the Netherlands and Austria, it is not seen that way in Ireland and Sweden. Chess is also seen as a sport in some Member States such as Belgium and Italy, but not in Germany.
According to the Court, one can only speak of a sport if there is a non-negligible physical component, referring to the underlying intention of the term “sport” in everyday language. ‘Bridge is an activity that benefits the mental and physical health of the practitioner, but that is not enough to speak of ‘sport’ in this context’, so the Court of Justice said. Sport must be interpreted strictly and from the systematic and teleological interpretation of the VAT Directive, the Court concludes that the concept refers to ‘activities characterized by a non-negligible physical component’. For this reason, bridge cannot be considered a sport.
A new definition of sports
Following this judgment, the aforementioned circular has recently been issued at Belgian level with the aforementioned new definition of sport. This circular means that from January 1, 2019, sports where a non-negligible physical component is present will fall under the VAT Code exemption. While the Advocate General stated in his opinion that in Belgium competitive bridge is regarded as a sport by the tax authorities, this will no longer be the case in the future. This has consequences, among other things, for the application of the exemption scheme provided for in Article 44 of the VAT Code.
[1] Circular 2018/C/84 on the VAT exemption for sports.
[2] CJEU 26 October 2017, no. C-90/16, ECLI:EU:C:2017:814, The English Bridge Union Limited/Commissioners for Her Majesty’s Revenue & Customs.
[3] Concl. M. SZPUNAR at ECJ June 15, 2017, C-90/16.
This article was written by our summer intern Elodie Blancke.