Hotel at a reduced rate, but not everything that comes with it follows automatically

The joined cases concerned three German cases on the application of the reduced VAT rate to hotel services.

In the first case, a business operated a hotel and restaurant with parking facilities. Guests could use the parking without separate charge. Breakfast was also included in the room price, although guests could opt out, in which case the price was reduced accordingly. The business took the view that the accommodation, breakfast and parking together formed a single supply subject to the reduced 7 % VAT rate.

In the second case, the operator of a guesthouse offered accommodation only together with breakfast for a fixed overall price, regardless of whether the guests actually consumed the breakfast.

In the third case, a business operated two hotels offering, among other things, parking and Wi-Fi and, in one of the hotels, fitness and wellness facilities as well. Guests could use those facilities without any additional charge on top of the accommodation price.

The German tax authorities did not follow that approach. In their view, such elements had to be distinguished from the accommodation and were therefore subject to the standard VAT rate.

Preliminary questions

The referring court essentially asked whether Article 98 of the VAT Directive, read together with point 12 of Annex III, precludes national legislation that excludes services such as breakfast, parking, wellness, fitness and Wi-Fi from the reduced VAT rate for hotel accommodation, even where those services may be regarded as ancillary to that accommodation and are remunerated through one fixed overall price.

So the question was not so much whether those services are economically linked to the accommodation. The real issue was whether a Member State may, within the category of “accommodation provided by hotels and similar establishments”, apply a reduced rate selectively to certain elements, while leaving others subject to the standard rate.

Member States may act selectively

The Court starts from the basic rule in the VAT Directive. In principle, the standard VAT rate applies. Reduced rates are exceptions and may only be applied to goods and services falling within one of the categories listed in Annex III.

According to settled case law, Member States may restrict the reduced rate to concrete and specific aspects of such a category. Two conditions must, however, be met:

• the delimitation must be objective, clear and precise

• the principle of fiscal neutrality must be respected

That is the core of the judgment. A Member State does not have to apply the reduced rate to everything that is economically connected with hotel accommodation.

The German rules are sufficiently delimited

The Court then notes that the German legislation appears, in principle, to define with sufficient clarity what does and does not fall within the reduced rate.

The reduced rate applies to the letting of living and sleeping accommodation for short-term stays, but not to services that are not directly connected with that letting. In addition, there is administrative guidance containing lists of services that do and do not fall within the reduced rate.

According to the Court, that is sufficient in principle, although the final assessment naturally remains a matter for the national court.

The fact that something is ancillary is not enough

This is the key point in the judgment.

The referring court started from the idea that several of the services at issue could economically be seen as ancillary to the accommodation. In the traditional analysis, one would then say that they follow the VAT treatment of the principal supply.

The Court moves away from that reflex. Where a Member State has defined the scope of its reduced rate with sufficient clarity, there is no longer any need to examine whether, from the perspective of the average consumer, the services form part of a single composite supply.

That is an important nuance. Member States may therefore, at legislative level, depart from the principle that the ancillary follows the principal.

Delimitation as compared with Stadion Amsterdam

The Court expressly clarifies that this judgment is not inconsistent with Stadion Amsterdam (C-463/16). In Stadion Amsterdam, the Member State concerned had not made use of the possibility to delimit concrete and specific aspects of a category of services separately. In that situation, the classic question whether there was a single supply remained decisive. In the joined cases C-409/24 to C-411/24, the position was different, because Germany had, according to the Court, introduced such a selective delimitation.

One overall price does not change that

The Court also states expressly that the fact that several elements are included in one fixed overall price does not in itself prevent them from being treated differently for VAT purposes.

Fiscal neutrality remains the limit

The Member States’ freedom is not unlimited. The selective application of a reduced rate must remain compatible with the principle of fiscal neutrality. The Court explains that it must be examined whether services such as breakfast, parking, wellness, fitness or Wi-Fi, viewed separately, are comparable, from the point of view of the average consumer, to the same services offered independently by another market operator. Where such services are in a substitutable relationship, it is in fact logical that they should also be subject to the standard rate when provided by a hotel, provided that those same stand-alone services are likewise taxed at the standard rate.

The essence of the decision

The Court concludes that Article 98 of the VAT Directive does not preclude national legislation under which services that do not directly serve short-term accommodation, such as breakfast, parking, fitness, wellness or Wi-Fi, are excluded from the reduced VAT rate for accommodation, even where they may be regarded as ancillary to that accommodation and are included in one overall price.

That is subject to the condition that the national legislation defines the concrete and specific aspects of the relevant category of services with sufficient clarity and that fiscal neutrality is respected.

Comment

This judgment matters because it further clarifies a classic, and at the same time rather controversial, discussion in VAT law. Traditionally, the starting point is that an ancillary element will in principle share the VAT treatment of the principal element.

The Court now makes clear once again that this line of reasoning does not always hold where reduced VAT rates are concerned. A Member State may confine the reduced rate to specific elements within a category of services, even where other elements are economically closely linked to the principal supply.

That does not mean that an ancillary element may from now on simply be taxed at a different rate from the principal supply. The judgment does not go that far. That is only possible where the national rules themselves clearly determine which services fall within the reduced rate and which do not. Without such a concrete delimitation, that line of reasoning cannot be relied on.

So, in theory, the Court leaves room for a more selective approach. In practice, that is much less straightforward. As soon as one seeks to tax breakfast, parking, wellness or Wi-Fi separately within one hotel price, it also becomes necessary to determine which part of the price relates to each of those elements. That inevitably requires an allocation.

For Belgium, this judgment comes at an interesting time. At the end of 2025, the federal government decided to increase the VAT rate for the supply of furnished accommodation and for making available a camping pitch from 6 % to 12 %, with effect from 1 March 2026. In its FAQ of 17 February 2026, the administration confirmed that this is, in essence, merely a rate increase, without any change to the existing rules on the delimitation of taxable and exempt accommodation. What fell within the rules on taxable accommodation before 1 March 2026 therefore remains, in principle, within that same framework, with the difference that where 6 % previously applied, 12 % must now, as a rule, be read instead.

That FAQ also confirms quite clearly the traditional approach under which the ancillary follows the principal supply. For hotel stays, it is expressly stated that additional services such as Wi-Fi, parking, sauna and similar services will, as a rule, be regarded as ancillary to the main accommodation service, with the result that the whole supply is subject to
12%  VAT. It is also expressly confirmed that breakfast consumed on site by the hotel guest is taxed at 12 %.

For camping sites, the same FAQ reflects a similar approach for electricity, water, gas and Wi-Fi where these are supplied together with a camping pitch.

For the time being, the Belgian administration therefore clearly continues, in the field of accommodation, to start from the classic logic that the ancillary follows the principal supply. The Court’s judgment does not change that.

The final lesson therefore seems to be this. The judgment does not require Belgium to change its current approach, but it does confirm that EU law leaves room for a more selective delimitation of services within the accommodation sector. Whether Belgium will ever make use of that room is ultimately a policy choice. For now, however, the Belgian position remains clear: in the case of taxable accommodation, ancillary elements will as a rule follow the principal supply and will therefore be subject to 12 % VAT.