Good News on VAT

Created on 23rd of November 2005

It now appears likely that the plan to impose VAT on restaurant and catering services on board ships and aircraft, as proposed in a recent draft Directive from the Commission, will not be implemented in the foreseeable future.

The Commission's draft Directive amending the rules governing the place of supply of services, published in July 2005, included, inter alia, a proposal that VAT be applied to restaurant and catering services on board ships and aircraft. However, Commission sources have indicated that the Council of Ministers is considering a declaration that the proposals for VAT on restaurant and catering services on board ships and aircraft would be 'without prejudice' to Article 8.1.c of the Sixth VAT Directive; this Article states that the Commission will bring forward a report, accompanied by proposals if appropriate, on VAT on goods and services for consumption on board ships and aircraft, together with catering and restaurant services. The net effect of such a declaration would be to maintain the status quo, as it is highly unlikely that the Commission will bring forward the Article 8.1.c report in the foreseeable future. This declaration has not yet been finally agreed, but is expected to be confirmed shortly.

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