VAT and the hotel industry tax regime: sometimes it’s the intention that counts
A company purchased a building on February 1, 2010, and later that year notifiedadministration of its intention to operate a furnished rental business offering hotel-style services following the completion of renovations. In May 2011, the company filed a self-supply VAT return, enabling it to claim a deduction for the VAT paid on the renovations.
Following a tax audit of the company,administration issued a tax assessment to the company, determining that it was not eligible for the hotel-related services tax regime and therefore could not claim the VAT deduction, as no hotel-related services were provided in 2011 or in subsequent years.
The Court notes, however, thatadministration challenged the taxpayer’s initial intention to carry out a hotel-related business, nor have they provided any evidence that the taxpayer’s intention changed at the time the self-supply declaration was filed. Nor do the tax authorities claim that the intention was insincere or abusive.
The court therefore finds that the VAT assessment is unfounded and dismisses the case against the company, as the tax authorities have not based their assessment on the failure to adjust the VAT that would have been required had the company no longer intended to operate a lodging business.
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