Germany VAT does not apply to subsidies to staff canteens

The German Federal Court has overruled the German tax office on its interpretation of VAT treatment on subsidies to staff canteens.

The German VAT office treated subsidies by employers to the operators of their staff canteens as a VAT event. And that the canteen operator should levy German VAT at 19% on their invoices to the employers. In addition, the tax authorities ruled that the employers did not have the right to deduct the VAT charged since they were not the recipients of a the food service.

However, the Court disagreed and found that the subsidy is payment for the operation of the canteen, a valuable service to help attract and retain a good workforce for the employer. But the Court did uphold the non-deduction ruling.