The case

X, the party concerned in this case, put into use an "art centre" which was built according to X's instructions. X deducted 48 percent of the VAT due because of the adjustment payment taking place at the moment of the first occupation (the art centre was used for VATable activities up to this percentage in the first quarter after the first occupation). However, the tax inspector did not agree with the position taken.

Aside from the application of the Dutch rules regarding the reassessment of input VAT, another issue (which is more interesting from the EU's perspective) in this case was the qualification of the service rendered by X, which of course connects with the extent of the right of deduction of input VAT.

The art centre consisted of a small and a bigger theatre, dressing rooms, technical rooms, a storage room, conference rooms and a bar/restaurant. Part of the activities of X is the provision of opportunities for creative organisations to perform in the theatre. The services consisted of the following elements:

  • Use of the theatre, foyer and dressing rooms
  • Use of theatre technicians
  • Use of the sound and light reproducing equipment
  • Guiding the visitors
  • Cleaning of the theatre

In the case at hand, X and the tax inspector disagree about the VAT qualification of the aforementioned activities.

The considerations

At first instance, the Dutch Court of Appeal ruled that X (economically spoken and seen from the point of view of a typical consumer) renders a principal service with some ancillary services by putting the theatre at the disposal of the creative organisations. The main goal of the groups is the exclusive use of the equipped theatre and therefore the principal service is the VAT-exempt letting of immovable property (limiting the right of deduction of input VAT of X).

The Dutch Supreme Court, however, does not agree with this position of the Court of Appeal.

According to the Dutch Supreme Court, every supply of a service must normally be regarded as distinct and independent. In case a supply consists of two or more elements, the question is whether they constitute a single supply or two or more different independent supplies which have to be treated separately.

There is a single supply where two or more elements supplied by the taxable person to the customer, being a typical consumer, are so closely linked that they form, objectively, a single, indivisible economic supply, which would be artificial to split.

Furthermore, a single supply is constituted in cases where one or more elements have to be regarded as the principal service, whilst one or more elements are to be regarded as ancillary services which share the tax treatment of the principal service.

The Supreme Court followed these steps and ruled as follows.


The service at hand consists of two or more different elements being more than ancillary services to the letting of the theatre. These elements facilitate a specific use of the theatre (not being the services normally rendered by the supplier which are closely connected to normal use of immovable property) and add an important value to the letting of the theatre.

The different activities of X have to be considered one supply of a service because the activities of X comprise a single supply from an economic point of view and should not be artificially split.

The different elements together constitute a service with its own nature, which has to be qualified (creating a setting which enables art groups to perform in the theatre) as a VATable service.

We believe that the judgment in this case is in accordance with the European Court of Judgment in the Deutsche Bank case C-44/11 in which the facts were different but the (fiscal) context was the same.