Consumption on the spot: Company canteen - BFH ruling XI R 2/21

The supply of food and beverages can be considered either a supply of goods or a supply of service. As a supply of goods, it may be subject to the reduced VAT rate, but as a "restaurant service" the standard VAT rate applies.

The V. Senate of the BFH (Bundesfinanzhof, Federal Fiscal Court) last dealt with the issue of a food court in a shopping centre in its decision of August 26, 2021, published on December 2, 2021 (V R 42/20) (see our correspondingonline article). In its ruling of October 20, 2021, not officially published on February 24, 2022, the XI. Senate now ruled on a company canteen - with an argument that only differs at first glance.

The serving of meals is a service if the service elements largely predominate

According to ECJ case law (most recently on April 22, 2021 - C-703/19), to assume that it is a restaurant service, the service aspect must be largely predominant, and the customer must be provided with infrastructure, or, in accordance with Art. 6 (1) EC VAT Regulation, be provided with sufficient auxiliary services to facilitate consumption on the spot. Third-party infrastructure only plays a role if it can be attributed to the supplier. The view of the average consumer is decisive.

Facts: Company canteen with a break room that is used for a variety of purposes

The case decided by the XI. Senate involved a company canteen. Canteen guests could eat the food purchased there, which was served together with reusable cutlery and crockery, in an adjoining company break room equipped with tables and chairs. The canteen operator argued that this break room was not attributable to him because it was not only used to eat food purchased in the canteen but was also used as a recreation room by employees of another company, craftsmen, fitters, and others. The canteen operator took the view, therefore, that he was merely supplying goods which, in turn, were subject to a lower VAT rate.

Relationship to the Food Court Decision of the V. Senate

Regarding a food court in a shopping centre, the V. Senate had dealt in detail with the question of whether the tables and chairs belonging to the shopping centre were attributable to the fast-food restaurant. For the XI. Senate, on the other hand, the deciding factor is not whether the break room is attributable to the canteen operator. It argues that the use of reusable crockery and cutlery are already sufficient supporting service elements to make the turnover as a whole be considered a supply of goods since this requires a certain amount of personnel to bring in, take back, and clean these items.

The decisive difference between the two cases lies in one minor detail:  the crockery and cutlery. In the food court, disposable crockery and cutlery were used, which do not need to be cleaned and therefore require significantly fewer staff resources. Therefore, whether the tables and chairs could be attributed to the fast-food restaurant was critical to the question of infrastructure. In the case of the company canteen, reusable crockery and cutlery already constitute the infrastructure necessary for this to be considered a service, so the issue of having a break room was no longer relevant. The decision of the XI. Senate, therefore, does not represent a deviation from the legal opinion of the V. Senate, so that the involvement of the Grand Senate was not necessary.

The case illustrates once again how diverse  the supply of food for immediate consumption is from a VAT perspective. Depending on the level of comfort offered to customers, the appearance of the crockery and trays, and what the surrounding area offers in terms of seating and eating opportunities, the outcome may be different. It is strongly recommended that tax advice be sought in such cases.

(Dated: 09 March 2022)