VAT'S IMPORTANT - NEWSLETTER 2024 - 03
NEWSLETTER 2024 - 03
EDUCATION - OR HOBBY?
When are pony riding courses for children VAT exempt?
FACTS OF THE CASE
The complainant runs a riding and boarding stable and offers training for riders and horses. According to the course program, the pony club is aimed at children between the ages of five and seven; children between the ages of three and five can take part at weekends accompanied by their parents. The course is led by instructors who are experienced with horses and children and with small ponies that are familiar to children. The contents of the course are the joy of riding, contact with the pony, self-confidence, respect for the animal's needs, dexterity and balance, group experience and teamwork. The aim is to teach the correct handling of the animal as well as fear-free, safe riding in a playful way to learn balance in walk and trot and help with starting and stopping
Unlike the operator of the riding school, the Swiss Federal Tax Administration was of the opinion that the riding courses offered for children aged 3 and over with parental supervision were taxable services.
JUDGMENT A-252/2024
In the opinion of the court, the educational nature of the offer is supported by the fact that it is offered by the complainant as a riding school, which also offers further riding courses and tests. Furthermore, the pony riding courses for children from the age of three accompanied by parents are run by "instructors experienced in the horse sector and with children", so that a certain degree of professionalism can be assumed. Learning or promoting dexterity and balance and caring for the animal undoubtedly include educational elements.
On the other hand, the fact that most of the course objectives listed include non-educational elements such as "contact with the pony", "self-confidence", "respect for the needs of the animal", "group experience", "teamwork", in which the focus is on personal development, argues against the existence of a course. The fact that the disputed courses take place exclusively at weekends is in any case an indication of their recreational nature.
Ultimately, the court comes to the conclusion that the external circumstances of the offer contradict that the main purpose is to impart knowledge. The reasons are in particular that the pony rides for children from the age of three accompanied by their parents only take place at weekends and only every two weeks, the duration is two hours and includes a picnic. In the opinion of the court, this speaks much more for an offer of leisure activities than for a course with a focus on imparting knowledge. Therefore, the arguments against an educational service outweigh the arguments in favor of an educational service.
Due to the offer of ongoing semester courses for different age groups, teaching services should also be considered. However, here too, the Federal Administrative Court came to the conclusion that not all requirements for the tax exemption of teaching services were met. In the present case, the prerequisite of performance monitoring was lacking in particular. The appellant also failed to prove that a planned, continuous transfer of knowledge took place. The course objectives submitted were too general for this. As a result, there was neither an educational nor an upbringing service, so that the FTA rightly did not assume that the pony riding courses for children from the age of three accompanied by parents were exempt from tax. Consequently, the appeal was dismissed in its entirety.
WHAT DOES THIS MEAN FOR ME AS AN ENTREPENEUR
This court ruling clearly shows how difficult it can sometimes be to draw the line between taxable and exempt services. However, the financial impact can then be immense for the companies concerned. This is why it is so important to clarify the supply from a VAT perspective in advance in order to be able to make adjustments - as in this case in the design of the riding courses.
We at terraVAT are happy to support you at any time; we are always at your disposal.
With best regards
Your terraVAT Team
Sabrina Frey Dr. Florian Hanslik
Senior Consultant Founding Partner
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