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Private cubicle cinema not eligible for reduced VAT rate

19 March 2010

Watching films in private cubicles cannot be regarded as entertainment subject to a reduced VAT rate, the European Court of Justice has ruled.

The claimant in the case, Erotic Center, a sex shop based in Bruges, offers clients pay-per-view films in private cubicles.

The company argued that the provision of this service fell within the category of “admissions to cinema” which allowed for an exception from the standard VAT rate under the sixth VAT directive.

Accordingly it had only levied VAT at 6 per cent rather than 21 per cent.

The Luxembourg court ruled in Erotic Center v Belgium (case C-3/09) that, as an exception, the terms “admissions to cinema” should be construed strictly.

In particular, the court said, the concept should be interpreted “in accordance with the usual meaning of those words”.

The feature common to all exceptions listed in the directive under the entertainment heading was that they were “available to the public on prior payment of an admission fee giving all those who pay it the right collectively to enjoy the cultural and entertainment services characteristic of those events and facilities”, the court said.

On this basis, the judges ruled, “the concept of admissions to a cinema cannot be interpreted as meaning that it covers the payment made by a customer so as to be able to watch on his own one or more films, or extracts from films, in private cubicles such as those in issue in the main proceedings”.

Timothy Kendal, barrister at 2 Bedford Row, commented: “This ruling comes as no real surprise to the lawyers but members of the public Europe-wide who enjoy solitary entertainment may be surprised at the consequent increase in cost”.

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