The VAT position of a village hall

Despite its community character, a village hall can find itself within the scope of VAT. Hiring out rooms, selling refreshments and other commercial activities can all give rise to taxable supplies.

The situation

A not-for-profit foundation runs a village hall with a kitchen, washrooms, a large room with a bar and a small room. The hall makes the rooms available for a charge, mainly to social and cultural organisations such as clubs and associations. Occasionally villagers hold a party or gathering there.

The foundation's constitutional purpose is to promote social cohesion in the village. Its board checks in advance whether prospective hirers intend to use the rooms in line with that purpose.

Staff or volunteers of the foundation are always present at gatherings to supervise, assist, clean and run the bar. The furniture and sound system on site can also be used. Income consists mainly of bar takings, room hire and grants.

The question

Are the village hall's activities subject to VAT?

The social and cultural exemption

To qualify for the exemption for social and cultural work, a club or community centre must be engaged in promoting social cohesion and quality of life within the meaning of the Dutch Social Support Act. Both the constitution and the actual activities must show that this is the case.

The supplies for consideration that the foundation actually makes are room hire and bar sales. Neither is characteristic of club or community centre work. It makes no difference that no profit is sought or that the hirers are mainly social and cultural organisations. Making the rooms available is therefore not exempt under the social and cultural exemption.

Exempt letting

The foundation can, however, rely on the exemption for letting immovable property. The knowledge group of the Dutch Tax Administration takes the view that the presence of staff and the use of furniture and a sound system do not affect this. The passive character of the letting is not lost.

The concession for catering income

Certain organisations named in the legislation can rely on the exemption for fundraising. A village hall in principle cannot, so its bar sales are taxable as a matter of law. Subject to conditions, the hall can nevertheless rely on the concession in paragraph 4.1 of the decree on fundraising and canteens, which keeps catering income outside the scope of VAT. The conditions are:

• only activities that are a normal adjunct to the organisation's main activities may take place in the canteen
• canteen income must not exceed € 68,067 a year, from sales directly connected with the canteen such as food and drink, tobacco products and gaming machines
• any operating surplus from the canteen must be used for the organisation's main purposes
• where canteen income is not taxed under the canteen scheme, the organisation may not reclaim VAT on the related costs

Why this matters in practice

A village hall should assess carefully which activities it carries out and how they qualify for VAT. The social and cultural exemption does not cover room hire and canteen sales, but there are other ways of staying outside the scope of VAT. Whether an exemption applies has to be assessed case by case.