The Court of Justice of the European Union has recently issued an opinion of Advocate General Maciej Szpunar in case C-90/16 (the English Bridge Union), which may have interesting ramifications on the interpretation of what constitutes a sport for VAT purposes. This opinion was issued in respect of a judgement subsequent to a preliminary reference by the Upper Tribunal (Tax and Chancery Chamber) of the United Kingdom, with regard to the VAT treatment of membership fees charged by the English Bridge Union.
There is no outright definition of what constitutes a sport in the VAT Directive (nor is there such a definition which applies throughout the EU in any form of primary or secondary legislation), and as a result, an interpretation of what constitutes a sport is required by the CJEU. Advocate General Szpunar has carried out a thorough analysis of whether there must be significant physical activity in order for an activity to be considered as a sport.
On the issue of whether there must be significant physical activity, the AG considered the wording, the system, the context/objectives and the history of the definition of ‘sport’. In respect of wording, an analysis of the word “sport” was made in different languages, whereas from a historical standpoint, the drafting history of the VAT Directive does not reveal any precise definition.
With regards to the system, the AG held that the “sport or physical education” nature of the exemption in the VAT Directive leads one to believe that one should not automatically assume that the intention of the exemption was to exclude activities which do not have a physical element as their defining feature, and as a result, the VAT Directive does not give any answers as to whether an activity that is predominantly based on mental instead of physical activity can be a ‘sport’ within the meaning of Article 132(1)(m) of the Directive.
From a context standpoint, meanwhile, the AG held that the main issue is not whether sport according to some definitions needs to entail an element of physical effort or exertion but, rather, whether the activities, which benefit from the VAT exemption in Article 132(1)(m) of the VAT Directive under the term ‘sport’ necessarily need to include an element of physical effort or exertion.
The AG considered the definition of sport by different sporting unions and federations, and held that there is a certain acceptance to define sport not by its physical nature but rather by its competitiveness, and as a result, certain sports that favour mental prowess over physical exertion, such as chess, were to be included within these definitions.
Furthermore, in terms of the VAT Directive, an exempt activity under Article 132 should be in the public interest. In this regard, the AG held that most activities commonly referred to as a sport must be understood as meaning the training of mental or physical fitness in a way that is generally beneficial to the health and the well-being of citizens.
Lastly, the AG stressed the cultural component inherent in the sport exemption, and that interpretation of sport in terms of Article 132(1)(m) must be made in light of the consideration of a sport in a particular country.
The AG concluded that although games of chance must be excluded from the definition as there is no relation between the effort invested and the outcome, and the tasks involved do not require any mental or physical skill, there is no compulsory presence of a certain physical element, and therefore, it is sufficient that the activity has a significant mental element which is material to its outcome.
Therefore, according to the AG, the game of duplicate contract bridge should constitute a ‘sport’ for the purposes of the present case.
A copy of the opinion of the Advocate General may be obtained by clicking here.