Marriott Rewards LLC, a company established in the US, manages the loyalty program of the Marriott hotel group which enables hotels of the group to issue loyalty points to their customers. When the latter use their points, the hotels invoice Marriott Rewards LLC the nights provided to customers or free upgrades under the loyalty program.
Marriott Rewards LLC requested a refund of the VAT mentioned on these invoices. After succeeding before the Montreuil administrative court and the Versailles administrative appeal court, the Conseil d’Etat cancelled the judgment which held that there was a direct link between the benefits of the members of the program and the manager’s activity, thus authorizing the VAT recovery based on the overhead costs theory.
The Conseil d’Etat considered that the loyalty program managers’ right to deduct VAT had already been resolved by the LMUK and Baxi Group CJEU case law (C-55/09) and held that payments made by the manager should be considered as the counterpart to the operations carried out by the members for the benefit of their customers. Consequently, the related VAT cannot be recovered. Only VAT relating to a supply separate from the accommodation provision rendered to the program manager would be eligible for VAT recovery.
The case has been referred to the Versailles Administrative Appeal Court. The referral decision will need to be closely studied as it will enable to determine if there is, apart from the accommodation provision, another service supply (such as commercial cooperation, potentially outside the territorial scope of French VAT).