7.3.1 Case 1

A student union runs a private club (only accessible by its members) where the members can meet each other. The members pay a membership fee and they pay for the drinks. Furthermore, the union also runs a discotheque and student restaurant which are not only accessible by members but also by non-members. The union also frequently organizes activities for members, which are either (wholly or partly) financed by separate fees payable by the participants or from the profit which is made from the discotheque and/or the student restaurant.

Is the membership fee considered to be the consideration for a taxable supply? If not, does that mean that part of the input VAT is not deductible?

The membership fee is not considered to be the consideration for a taxable supply and the union is considered not to qualify as a taxable person for its ‘primary union activities’. The input VAT attributable to those activities is not deductible.

Student unions are in practice considered to be ‘youth clubs’ (in the ordinary run of events where students are mostly under 21 years of age). Under art. 31 VAT Act and Schedule 9, Group 6, item 6, the provision of facilities by a ‘youth club’ is exempted under certain conditions. The membership fee would be the consideration for an exempt supply. The provision of facilities to non-members and the supply of food and drinks to members and non-members are VAT taxable. The student union is a taxable person for all its activities but some of its supplies are taxable and some of its supplies are exempt.1

The Bundesfinanzhof accepts and follows the ECJ’s view that membership fees may constitute a consideration for granting the opportunity to use the benefits provided by the association.2 The authorities still take the position that ‘pure’ membership fees are not a consideration.3

Therefore, the standard solution would be like the one in the Netherlands. However, the ECJ and the Bundesfinanzhof allow a taxpayer to choose for the most favourable approach, i.e. the direct invoking of the directive if this is beneficial to the student union (e.g. because of significant input VAT).

The membership should be regarded as the consideration for a taxable supply, i.e. access to services and facilities. As such, it should in principle be VATexempt4 (provided certain conditions are met). Therefore, the input VAT relating to this activity is not deductible. The other activities, inter alia the supply of goods and services to non-members would in principle be taxable.