Online message – Monday 07/10/2023
sales tax | Input tax deduction of a controlling company from incoming invoices from the canteen operator for a controlled company (FG)
If an external service provider runs a company canteen for a controlled company on the basis of a service contract, it provides a service to the controlled company and thus also to the controlling company. A gratuitous supply of value that conflicts with the input tax deduction does not exist if the management services provided by the canteen operator are in the employer’s own commercial interest, are due to special circumstances of the company’s economic activity and the commercial interest in the internal catering is the advantage for the employees there resulting from the reduced delivery of the meals, clearly predominates (FG Baden-Württemberg, judgment of October 6th, 2022 – 12 K 2971/20, final).
Facts: The plaintiff is the tax group parent of the subsidiary B GmbH. B GmbH is a company that produces in shifts. B GmbH maintains a company canteen at its business premises, which is operated by an external service provider in its own name and for its own account. In the canteen, all employees of B GmbH can eat (between) meals offered by the service provider, have a drink or just stay there, for example to eat food they have brought with them. There is a service contract with the canteen operator and the controlled company, which regulates, among other things, how the service provider has to settle accounts with the controlled company. If the sales revenue was not sufficient to cover the cost of goods sold and the personnel, general and administrative costs (shortage), the canteen operator issued a monthly bill for the shortfall. In addition, the canteen operator issued an invoice for a fixed agreed service fee to cover overhead costs and as a share of profits. The defendant tax office (FA) denied the input tax deduction claimed by the plaintiff from these invoices because it had already been intended when the service was purchased to use it exclusively and directly for a free value tax.
The FG stated:
The performance of the canteen operator was carried out to the plaintiff. There is a paid exchange of services between the canteen operator and the plaintiff’s controlled company. By running the canteen, the canteen operator provides a service to the plaintiff’s controlled company. The canteen operator invoiced the plaintiff’s subsidiary for his services monthly with a sales tax statement. The input tax deduction does not conflict with the fact that the invoices are addressed to the plaintiff’s controlled company. This appears externally and is independent under civil law, but a dependent part of the controlling company, the plaintiff, in terms of sales tax. As a result, the plaintiff, as the parent company, is entitled to deduct input tax.
The input services of the canteen operator were carried out to the plaintiff as the controlling company for her company. An input tax deduction will be ruled out if the “management service” provided is not used for economic activity at the time it is purchased, but exclusively and directly for a free value tax i. S. of § 3 Para. 9a No. 2 UStG was intended to be used, the employee has obtained a consumable advantage, e.g. the management of the canteen serves the private needs of the employee and is not caused by special circumstances of the company’s economic activity.
In assessing the circumstances of the individual case, the Senate is of the opinion that the plaintiff’s interest in the in-house catering clearly outweighs the advantage that results for the employees there from the cheaper delivery of the meals. In the year under dispute, the payments were made in the employer’s own commercial interest. They are due to special circumstances of the company’s economic activity. In the case at hand, the special circumstances included: the location, the mode of operation and the management of the controlled company of the plaintiff. Due to the nature of the activity (a production facility, the break regulations with the production lines shutting down during the breaks, the canteen management within the company premises with short distances between production, catering facilities and “lounges” in order to be able to guarantee compliance with the break times), the location of the company (outskirts outside of a metropolitan area, difficult accessibility by public transport, the parking situation) and the possibility of gaining a competitive advantage in the search for qualified employees, the input services serve the economic purposes of the plaintiff. A smooth production operation serves to carry out taxable services. A break of 15 minutes is also sufficient due to the internal room layout to get a snack or help yourself to the vending machines. This is also available outside of the food distribution times. Contrary to the statements of the FA, it is not decisive for the VAT assessment whether and how a “relaxed meal” is eaten and whether food can be brought from home. In any case, it seems to be important to the employees to have eating options on site, as the involvement of the works council in the specific design shows. This speaks for an entrepreneurial co-initiation due to the location of the production site.
If the personal advantage that the employees derive from the cheaper provision of meals appears to be only secondary compared to the needs of the company, there is also no free value tax according to § 3 Para. 9a No. 1 UStG, which could exclude an input tax deduction. There are no unpaid benefits for employees if they are of benefit to the employee, but the measures are primarily in the employer’s own commercial interest.
Those: FG Baden-Württemberg, Newsletter 1/2023 (JT)
Source(s):
NWB FAAAJ-43637