Luxembourg, 18/02/2005 (Agence Europe) - The European Court of Justice has ruled that VAT cannot be levied on gambling and the use of gaming machines outside authorised public casinos since authorised public casinos are exonerated from VAT for such activities, explains the Court in a press release. The Court explains that all operators can claim direct use of this VAT exemption directly from their national tax authorities. The Court was ruling on the cases of Linneweber and Akritidis, the name of two slot machine operators in German cafes and gaming halls, who challenged the legality of being subject to VAT themselves despite the fact that authorised public casinos are exempt from VAT under German law.
Under the sixth VAT Directive (1977), running gaming machines is generally exempt from VAT, although the Member States have the power to determine limits and criteria for the application of this exemption, explains the Court, but they have to ensure fiscal neutrality. Fiscal neutrality means that similar services have to be treated identically for tax purposes and be subject to the same level of tax. The actual identity and legal set-up of the service providers is irrelevant when it comes to determining similar services. The Court concludes that Member States cannot make exoneration from VAT dependent on the particular legal identity of the operator of the games and slot machines in question.
The Court also points out that the relevant measure of the directive foreseeing VAT exemption for gambling and slot machines has direct effect, meaning that individuals may claim direct exemption in national courts, which the two operators in question has done. Their case was taken to the German Federal Finance Court (Bundesfinanzhof), which in turn asked the European Court of Justice for its opinion. In its recent ruling, the Court of Justice refused to restrict the impact of its ruling in time, pointing out that the financial impact of such a preliminary ruling for a Member State did not in itself justify applying time restrictions on the impact of the ruling.