The Federal Fiscal Court (BFH) ruled by judgment of november 10, 2010, XI R 79/07, that the revenues of a commercial operator of slot machines are not tax-exempt under Section 4 No. 9 lit. b of the Value Added Tax Act (UStG) and that this provision violates neither Union law nor the Basic Law.
According to Section 4 No. 9 lit. b UStG in the new version applicable from May 6, 2006, "revenues falling under the Race Betting and Lottery Act are tax-exempt. Revenues falling under the Race Betting and Lottery Act that are exempt from race betting and lottery tax or from which this tax is generally not levied are not exempt."
In the present appeal proceedings, which concern the revenues of a GmbH from the operation of slot machines in an arcade, the BFH had doubts as to whether this regulation was in conformity with the VAT Directive. It therefore suspended the appeal proceedings and asked the Court of Justice of the European Union (CJEU) whether Article 135(1)(i) of Directive 2006/112/EC is to be interpreted as permitting Member States to adopt a provision under which only certain (race) bets and lotteries are exempt from tax and all "other games of chance involving stakes" are excluded from the tax exemption?" (cf. decision of December 17, 2008, XI R 79/07 and the related press release No. 16/2009 of February 18, 2009). The CJEU answered this question in the affirmative with its judgment of June 10, 2010, C 58/09.
The appellant was of the opinion that, irrespective of the preliminary question answered by the CJEU, an assessment of tax on revenues from the operation of slot machines in arcades violated both European law and German constitutional law. The BFH did not agree. In particular, it rejected the appellant's view that the VAT assessment was unlawful because commercial operators of slot machines could not pass on the VAT to the end consumers (players). It also denied a violation of the VAT neutrality principle and the general principle of equality (Article 3(1) of the Basic Law), which the appellant had asserted due to the treatment of revenues from public casinos operating slot machines.
Judgment of the BFH of november 10, 2010. Ref. No.: XI R 79/07
Source: Press Release of the BFH
Goldberg Attorneys at Law 2011
Attorney Michael Ullrich, LL.M. (Information Law)
Email: info@goldberg.de
