District Court of Noord-Holland: car club owes no VAT on membership fees

The inspector failed to make it plausible that there is a direct link between the subscription and the association's activities. Whether the ruling survives on appeal is another matter.

An association of car enthusiasts charges its members an annual subscription and organises a range of activities. Members can take part in a two-day event, multi-day tours and excursions, workshop days, sports days, a festival with the chance to race and exhibit their car, a classic car festival and trade fairs. They also receive the club magazine periodically and have access to a website.

The inspector took the view that the subscription is subject to 21% VAT, because members obtain a right to take part in the association's activities. The association sees it differently: in its view this is general representation of members' interests, namely preserving this make of car. There is no direct link between subscription and activities, and the subscription serves only to keep the association going.

The ruling

The District Court of Noord-Holland sided with the association. The inspector should have made it plausible that a direct link exists, and failed to do so.

From the explanation given at the hearing, the court concluded that non-members, prospective members and members' partners are also welcome at the activities and may take part without paying. Members also always pay the same subscription, whether or not they take part and regardless of how many activities are organised. That the activities are largely funded from subscriptions is not, in the court's view, a reason to conclude that an economic interest is involved.

Our reservations

In our estimation it is doubtful whether this ruling will survive on appeal. The court naturally proceeded on the facts and arguments the parties put forward, and reading between the lines the inspector's reasoning was less well prepared than the club's.

It is also striking that the court attaches so much weight to non-members being able to take part. How often that happens in practice, and how far the association accepts it, is open to question: it can hardly be intended that non-members enjoy the same rights in the long run as paying members.

There is also a question how the argument that members always pay the same amount sits with Kennemer Golf & Country Club (C-174/00). There it was held that subscriptions can constitute consideration for the services an association supplies, even where members who do not regularly use its facilities are still obliged to pay.

In short: it is a good thing that the taxability of subscriptions is being tested, because it certainly cannot be assumed in every case that there is taxable consideration, as the tax authorities appear to think. Whether this strongly fact-specific ruling survives on appeal is a different question.