In two decisions dated October 9, 2024 (CE no. 472257, Société Hôtelière Paris Eiffel Suffren and CE no. 489947, Société AccorInvest) rendered in the hotel industry, the French Administrative Suprême Court (Conseil d’Etat) held that “no shows” are subject to VAT.
Decisions rendered in the context of pure “no shows”…
In these two cases, the issue was relating to sums debited by the hotels on the bank accounts of clients who did not show up on the agreed date for the service, without prior cancelling their reservation within a specified time frame.
Based on the principles set out by the CJEU’s case law, notably in the Air France case (CJEU C-250/14), and relying on the general terms and conditions of the hotels, the Court concluded that these sums are taxable, to the extent that they were constituting the consideration for an accommodation service that the client was able to benefit, regardless of whether this service was used or not.
… not excluding the principle of a non-taxation scenario in case where the client uses a cancellation option
However, the Court noted that the solution would have been different if the client had made use of the cancellation option contractually offered by the hotels. In this scenario, the amounts debited by the hotels could be considered as non-VATable fixed cancellation indemnities.
This situation refers to the contractual mechanism of deposits (“arrhes” in French). This particular case pointed out by the Court specifically refers to the CJEU’s decision concerning deposits in the hotel sector (CJEU C-277/05, Société Thermale Eugénie les Bains).
The payment of deposits legally corresponds to the price of the cancellation option provided by the hotel and the client. The operators of the sector shall review their general terms and conditions regarding cancellation to identify the VAT implications of the sums retained from the client.
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