Tax Lawyers
Not every ‘no show’ leads to a VAT refund
On December 23, 2015 the Court of Justice of the European Union (CJEU) rendered judgment in the
joined French Air France-KLM and Hop!-Brit Air SAS (case nos. C-250/14 and C-289/14,
hereinafter: “Air France-KLM”). It ruled that advance payments may be subject to VAT in the case
of ‘no shows’.
1. The case
The taxpayers are airline companies that offer both domestic and international flights to passengers.
When an airline ticket is purchased, passengers pay the full price of the ticket (including VAT) in
advance. The airline companies took the position that no VAT was payable at the time the passenger
did not use their ticket, because in that situation no transport service had been provided to the
passenger. The French Conseil d’État requested a preliminary ruling from the CJEU on whether an
airline ticket can be equated with the effective performance of a transport service and therefore VAT
is payable on the ticket prices paid by passengers that do not show up.
2. Analysis of CJEU judgment
The CJEU has now ruled that airline tickets issued by an airline company are subject to VAT when
the passengers do not use the issued tickets and cannot obtain a refund of the price of the ticket. The
CJEU has thus determined that advance payments may be subject to VAT in the case of ‘no shows’.
This is because the airline ticket is a confirmation by the airline company that a seat on the plane will
be reserved for the passenger. The passenger is therefore entitled to make use of the transport
service. The CJEU also ruled that VAT is chargeable at the time the airline companies receive the
purchase price of the airline ticket.
3. Potential implications
In a previous judgment, the CJEU ruled that a fee in the case of a cancellation is not subject to VAT,
but qualifies as non-taxable compensation (Société Thermale d'Eugénie-les-Bains, July 18, 2007, C277/05, hereinafter: “CJEU Sociète Thermale”). Although the facts in both cases are similar from an
economic perspective, we believe that the contractual conditions applied in both judgments differ to
such an extent that this can lead to a different VAT treatment. Based on CJEU Sociète Thermale, a
cancellation fee can, in certain situations, still continue to qualify as non-taxable compensation for
VAT purposes.
This does not alter the fact that the decision by the CJEU in the Air France-KLM case may affect
businesses in various sectors, such as hotels, restaurants, tour operators, theaters, cinemas, museums
and event agencies. The CJEU judgment also especially impacts the telecommunications sector,
given that specific rules apply here to unused balances. We expect the Dutch tax authorities to start
paying particular attention to the VAT implications of cancellations. We recommend that in
situations of ‘no shows’ or cancellations, the underlying contract and general terms and conditions
are carefully scrutinized.
Tax Lawyers
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The tax advisors of Meijburg & Co’s Indirect Tax Group would be pleased to help you identify the
possible impact of this judgment on your business. Feel free to contact one of them or your regular
contact at Meijburg & Co for more information.
Meijburg & Co
December 2015
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circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely
information, there can be no guarantee that such information is accurate as of the date it is received or that it will
continue to be accurate in the future. No one should act on such information without appropriate professional
advice after a thorough examination of the particular situation.