Linneweber / Akritidis decision

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With the Linneweber / Akritidis decision has European Court of Justice (ECJ) set on 17 February 2005 that the Sixth Council Directive 77/388 / EEC on the harmonization of the laws of the Member States relating to turnover taxes of VAT taxation of the operation of games of chance outside public casinos precludes if at the same time the operation of such games of chance by public casinos is tax-free.

Facts and subject of dispute

According to § 4 number 9 lit. b UStG , sales made by the licensed public casinos with games of chance or gaming machines were exempt from sales tax in Germany. Outside of such casinos, however, sales were taxable.

Ms. Linneweber operated slot machines in restaurants and gambling halls belonging to her in Germany. Mr. Akritidis hosted card games in a game room he operated. The sales of both plaintiffs were subject to sales tax. In response to their action, the Federal Fiscal Court (BFH) referred the matter to the ECJ for a preliminary ruling.

The decision of the ECJ

In a judgment of February 17, 2005 (case C-453/02 and 462/02), the ECJ ruled in both cases that the VAT exemption of Section 4 No. 9 lit. b UStG is to be extended to the operation of games of chance outside of public casinos.

According to Directive 77/388 / EEC, the member states are free to determine the limits and conditions for exempting games of chance from VAT. You would have to observe the principle of tax neutrality. Therefore, competing services are to be treated equally if they are of the same kind. When examining the similarity, however, the identity of the service provider and his legal form are not a suitable differentiation criterion.

The sales tax exemption according to Directive 77/388 / EEC is therefore to be applied directly, without having to take into account the EC-illegal restrictions of the German sales tax law.

The ECJ rejected a restriction of the temporal effect of the judgment requested by Germany.

Effects of the judgment

The ruling led to private gaming operators in Germany being exempt from sales tax. Since the casino tax of the public casinos is not due for these , there was, contrary to the intention of the legislature, a competitive advantage for the private operators over the public casinos. In order to remedy this, an amendment to Section 4 No. 9b of the Sales Tax Act has extended the sales tax liability to private and public gaming operators from May 6, 2006. This takes into account the requirement of neutrality.

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