EU VAT Treatment of Gambling Services: Key ECJ Ruling Explained

The gambling industry is a complex and dynamic sector, both in the EU and globally. Governments are closely monitoring it, particularly in the realm of taxation. This complexity is evident in the case of Chaudfontaine Loisirs SA (Company), an online gambling company, and État belge or Federal Public Service of Belgium (FPS Belgium).

The Court of First Instance, Liège, submitted the request for a preliminary ruling to the European Court of Justice (ECJ), which published its decision on September 12, 2024.

Facts of the Case and Final Decision of the ECJ

Under the EU VAT Directive, betting, lotteries, and other gambling (gambling services) are exempt from VAT. Still, Member States have the right to define conditions and limitations for VAT treatment of gambling services.

Exercising this right, Belgium repealed the VAT exemption for online gambling other than lotteries in 2016. The decision to impose VAT on online gambling was annulled by the Belgian Constitutional Court in 2018. Following the Constitutional Court decision, in its VAT return filed in November 2019, the Company indicated the VAT adjustments in favor of EUR 640.478,82, asking the Tax Administration to refund EUR 630.240,56. The Company paid this VAT amount from July 2016 to May 2018.

This was followed by an additional VAT refund request from the Company, which the Tax Administration denied, arguing that the Company does not have the right to refund. Moreover, in its decision, the Tax Administration stated that the Company owes VAT and EUR 64.047,88 for fines and late interest payments.

Wanting to prove the Tax Administration wrong, the Company brought an action against the Tax Administration before the Court of First Instance, stating that even though the Constitutional Court repealed the decision to impose VAT on gambling services due to inconsistency between federal and local rules, the Belgium State did not respect this decision.

The competent Court forwarded the request for a preliminary ruling, raising questions about the principle of fiscal neutrality permitting a Member State to exempt only non-electronic gambling while not exempting online gambling from the VAT. Additionally, it raised the question of whether the lotteries can remain exempt from VAT even if provided electronically and whether a Constitutional Court can annul national laws without considering their compatibility with EU laws.

The ECJ ruled that EU Member States can apply different VAT rules for various gambling services, meaning they can treat online and offline gambling differently. Nevertheless, EU Member States can treat lotteries and other types of gambling differently as long as the differences between them are apparent to the consumer.

Furthermore, the ECJ ruling confirmed that national courts, such as the Constitutional Court, must consider the EU regulatory framework when deciding. Finally, the EU rules provide the right to claim a VAT refund incorrectly charged by a Member State, in this case, Belgium.

Conclusion

As always, the ECJ ruling critically clarifies the complex VAT issues, settling disputes about VAT-related issues. Moreover, they establish essential practices and precedents for similar cases in the future.

Source: PwC, ECJ Case C-73/23