The European Court of Justice (ECJ) has ruled in the case C-592/15 British Film Institute (BFI) that the provisions related to exemption for cultural activities mentioned in the old Sixth VAT Directive and the new EU VAT Directive 206/112/EC are not directly applicable and tax payers should follow the legislation as it is transposed in each EU Member State.


BFI is a non-profit-making body established in order to promote and preserve cinema in the United Kingdom. BFI is partially financed via its activity of selling tickets for admission at theatres and film festivals located in the UK where it screens movies. From 1 January 1990 to 31 May 1996, it charged VAT at the standard UK rate for admission to movie screenings in various theatres and films festivals.

In March 2009 however, BFI applied for a refund of that VAT paid in relation to the admission rights for the period at issue.  It did this because it took the view that it had provided cultural services which should be exempt under the provision of article 13A(1)(n) of the Sixth Directive, (now Article 132(1)(n) of the VAT Directive).

The provision in question stated that Member States shall exempt

certain cultural services and goods closely linked thereto supplied by bodies governed by public law or by other cultural bodies recognised by the Member State concerned”

HMRC rejected the initial claim for the VAT but BFI appealed and won at the UK’s First-tier Tribunal. The Tribunal found that the wording of the VAT Directive was clear and precise and therefore had direct effect (i.e. taxpayers could reply on it rather than the VAT legislation in their own Member State). Further to an appeal by HMRC, the Upper Tax Tribunal upheld the view of the First-tier Tribunal and added that the term “certain” in the Directive should be interpreted as meaning that the exemption applied to cultural services supplied by bodies governed by public law or other cultural bodies recognised by the Member State.

HMRC appealed against this decision as well, with the case then going to the Court of Appeal of England and Wales.  It decided to stay the case and refer it to the ECJ

ECJ Ruling

Both the ECJ and the Advocate General’s opinion (which is a preliminary non-binding opinion released before some ECJ judgements) concluded that the wording of article 13A(1)(n) of the Sixth Directive “…does not require the exemption of all cultural services, so that the Member States may exempt ‘certain’ of them while subjecting others to VAT.” The Court went on to add that article 13A(1)(n) must be interpreted as not having direct effect and hence it may not be relied on directly.

Consequently, this meant that the services provided by BFI could not be seen to be exempt cultural services based on the wording of the Directive.  Instead, the VAT liability would be determined by the provisions transposed to the domestic UK legislation.  Consequently, the BFI lost its claim for repayment of the VAT it believed was wrongly declared by it.


This view taken by the ECJ in this case is in line view with established case-law stating that the terms used to specify exemptions are to be interpreted strictly. The term “certain” used in the wording of article 13A(1)(n) of the Sixth Directive and later in the VAT Directive cannot be seen as applying to all services provided by a public body or other cultural entity recognised by the Member State.

The ruling seems also to indicate that it is at the discretion of each Member State to create a list of exempt cultural services, although the Court did not specify the exact amount of discretion permitted. The European Commission had submitted in the past a proposed list of exempt cultural services, but it was rejected which seems to reinforce the view that the intention was to allow each Member State a succinct degree of discretion in determining the list of services that qualify for the exemption.

Public bodies or other cultural entities organizing events outside of their home Member State cannot not presume their activity is exempt simply based on their status or the legislation applicable in the country of establishment. A careful review of the legislation in each specific Member State where they intend to perform services should be undertaken in order to ensure that the correct VAT treatment is applied and compliance obligations met.  Not doing this could lead to unnecessary penalties or fines.

By |April 10th, 2017|