New VAT scheme for cafeterias from 2017!

Certain exempt taxpayers running not-for-profit operations are already covered by the “cafeteria scheme”, which involves a VAT tolerance allowing the cafeteria to be included under the taxpayer’s VAT-exempt activity. But from 2017 the terms of this administrative scheme are changing.

1. Context of the issue

Supplying food and beverages for consumption on the premises (i.e. operating a cafeteria) is a service subject to VAT, payable by the person performing this activity. The taxability of the activity is unrelated to whether its purpose is to make a profit or not.

In essence, operating a cafeteria has nothing to do with the VAT-exempt activities described in Art. 44(2) of the VAT Code. However, taxation of the “cafeteria activities” carried on by these VAT‑exempt taxpayers could lead to undesirable and excessively complex situations. So the VAT authorities provided an “administrative tolerance” whereby, subject to compliance with certain conditions, operating a cafeteria could also be exempt from VAT. The VAT authorities have now published a decision which alters these conditions slightly.

2. Existing cafeteria scheme (expires 31 December 2016)

The origins of the current scheme lie in an answer to a parliamentary question. The question was whether having a bite to eat while visiting a museum, zoo, botanical garden, etc., should be regarded as merely incidental to the main activity (the visit) and thus should also be exempt from VAT.

The Minister replied that although the operation of a cafeteria is in theory subject to VAT, the VAT authorities had nevertheless decided that when the operator of a museum, historical or natural monument, zoo or botanical garden also runs a cafeteria on the premises, the supplying of food and beverages in the cafeteria must be considered to be a service related to the visit itself, meaning that it too is exempt from VAT. However, for the exemption to apply, a number of conditions must be met:

• The cafeteria can only be accessed by people actually visiting the attraction, regardless of the nature of their visit (including guided tours, individual visits, group visits, etc.). This implies that there is no direct access to the cafeteria space from outside the attraction and that this space can only be accessed during the opening hours of the attraction;

• The operator may not carry on any other taxable activities and may only provide “light meals” in the cafeteria; and

• The income from the cafeteria may not create any unfair competition and must therefore remain a relatively small part of the overall revenue. The VAT authorities believed that in practice these conditions would be met if the income from the cafeteria activity did not exceed €5,580 (now €25,000), or if this amount was exceeded, it must not be more than 10% of the operator’s overall exempt revenue.

If one or more of these conditions is not met, all income from the cafeteria is subject to VAT, unless the exemption for small businesses can be applied.

However, if a third party is given a licence to operate the cafeteria, its operations will be subject to VAT under the normal rules.

According to the Minister, this administrative tolerance scheme is applied to multiple contexts envisaged in Art. 44(2) of the VAT Code, such as:

• Hospitals, psychiatric institutions, clinics and health centres;

• Operators of sports facilities and facilities for physical exercise;

• Museums, historical monuments, natural monuments, botanical gardens and zoos;

• Organisers of theatre and ballet performances, film screenings, concerts and conferences.

It goes without saying that in order for the administrative tolerance referred to above to be applied in these situations, each of the basic conditions for the various exemptions must also be met.

3. New cafeteria scheme from 2017

Under the revised scheme, the starting point remains that the operation of an eating and drinking establishment is exempt from VAT, provided this operation is incidental to the exempt activities and each of the conditions of application are met:

1. The eating and drinking establishment (= cafeteria) is operated by a VAT taxpayer whose primary activity involves one of the following VAT exempt activities:

• A hospital, psychiatric institution or similar establishment;

• An institution set up to provide elderly care or care for the disabled (a significant new addition compared to the current scheme);

• A sports facility or facility for physical exercise;

• A museum, historical monument, natural monument, botanical garden or zoo;

• Theatre or ballet performances, film screenings, concerts or conferences.

2. The operation of the cafeteria occurs on the institution or attraction’s premises where the exempt activities are also performed;

3. The exempt primary activities account for the majority of the activities carried on by the institution/attraction concerned. This means that the total amount of the exempt activities is greater than the total amount of the other activities carried on, both taxed and exempt (including the eating and drinking establishment). This is also a significant expansion, since if the aforementioned taxpayer has, in addition to the cafeteria, also developed another extra activity which is subject to VAT, it may now also be eligible for this tolerance;

4. The cafeteria can be accessed only by people who are also recipients of the specified exempt services, or their visitors or guests, and by the staff of the attraction or institution. This condition is met if the cafeteria cannot be accessed outside of the opening hours of the attraction or institution, and has no direct external access. It is possible that compliance with this condition can also be demonstrated through other factual elements;

5. The income from operating the cafeteria may not amount to more than 10% of the revenue from the exempt activities of the attraction/institution concerned. Exceeding the target by 10% (i.e. up to a maximum of 11%) of the revenue on a single occasion per period of five consecutive calendar years will be disregarded (there is thus no longer any question of the small business scheme threshold, nor of any restriction concerning unfair competition).


Unlike with the existing scheme, under the new scheme the nature of the meals provided is no longer relevant, nor does it matter that the attraction or institution concerned also carries on activities that are subject to VAT.

If any one of the above conditions is no longer met, the tolerance will lapse from the following calendar year.

4. Not to be confused with the organisation of dinners for financial support

The aforementioned scheme is an administrative scheme or tolerance whereby the taxable activity of operating a cafeteria is absorbed, so to speak, by the VAT-exemptions listed above. This administrative scheme should not be confused with the statutory exemption for activities organised in order to obtain financial support for the specific exempt activities. The VAT Code provides that the supply of goods and services in conjunction with activities organised to obtain financial support for specific activities that are exempt from VAT, are also exempt from VAT (e.g. fundraising for a sports club, theatre company, etc.). In principle, this VAT exemption is only for extraordinary income from activities that are not commercial activities that could lead to competition. This includes such things as an annual dinner, annual mussel soup night, bake sale, etc.

5. An exemption means no entitlement to VAT deductions

The broadening of the aforementioned administrative tolerance may have the consequence that more cafeterias in these types of contexts will be covered by the VAT exemption. However, the flipside is that they will lose their entitlement to claim VAT deductions. So not only might the expansion mean losing a future entitlement to a deduction, it may also lead to a VAT review of costs incurred and investments made in the recent past. The administrative tolerance defines a number of situations in which the operation of an eating and drinking establishment is exempt from VAT; this is not an opt-in scheme. The only way to avoid the unwelcome application of the exemption is to make sure that one or more of the conditions of application is not met.

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