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ECJ Rules On Definition Of Sport For VAT Purposes

The European Court of Justice has delivered a landmark ruling in the area of value-added tax. It has said games like the card game “bridge” is a sport for value-added tax purposes, even though players need not be physically active to participate.

The English Bridge Union sought to recover the VAT it had collected on the entry fees to its events from HM Revenue and Customs, the UK tax authority, citing Article 132(1)(m) of the European Union VAT Directive, which provides for an exemption from VAT for the supply of certain services closely linked to sport or physical education by non-profit making organizations to persons taking part in sport or physical education.

Bridge is a trick playing card game, played by four players in two competing partnerships, with partners sitting opposite each other around a table. The game has four phases: dealing the cards, bidding, playing the cards, and scoring the results. The ruling concerned a variant of bridge: “duplicate bridge,” which is widely played in the UK, Ireland, and northern Europe.

The Court has given a ruling on the question of which kinds of activity can be regarded as a sport. In Zamberk, the ECJ held that non-organized and unsystematic sporting activities not aimed at competition fall under the exemption. However, in Commission v. Netherlands, it held that the renting of leisure boats was not to be equated with a sporting activity, since their purpose could be purely recreational. That case did not, however, deal with the definition of a sport as such, as it was not contested that boating could be a sport, the ECJ noted.

In Rank Group, the Court held that a difference in treatment for the purposes of VAT of two supplies of services which are identical or similar from the point of view of the consumer and meet the same needs of the consumer is sufficient to establish an infringement of the principle of fiscal neutrality (which must be upheld by member states in applying EU VAT law) in the context of the exemption for gaming laid down in Article 135(1)(i) of the VAT Directive.

It was noted by the Court that the term “sport” is not defined in the EU VAT Directive or elsewhere in EU law.

It said: “The system of the VAT Directive as a whole is inconclusive as to the question whether an activity that is predominantly based on mental instead of physical exertion can be a ‘sport’ within the meaning of Article 132(1)(m) of that Directive.”

Moreover, it noted that there is a broad international acceptance of duplicate contract bridge as a sport, not least because the International Olympic Committee, in 1998, decided to classify it as a sport. It has now even been granted Olympic status, which means that it will be offered at the 2020 Olympic Games.

On other activities that might be considered sports, the Court said: “Few non-physical activities will reach the definition of a sport as they need to be not purely recreational, must reach a certain level of acceptance, and must have the characteristics and benefits associated with most physical sports, in so far as effects on mental fitness and wellbeing should be regarded as interchangeable with physical fitness and wellbeing.”

However, it said bridge is neither a game of chance, nor does its classification as a sport seem to be contrary to principles the court considered. It said the fact that tournaments take place on an international stage and that the results of the game seem to be directly dependent on the skill and training invested in the activity – according to the findings of facts made by the referring court – point in the direction of contract bridge being a sport.

Although it said that it is for the UK Upper Tribunal (Tax and Chancery Chamber) to ultimately rule on the matter, it proposed that it answer that a physical element is not necessary for an activity to be a “sport.” It said: “Duplicate contract bridge as the activity at issue in the main proceedings is a ‘sport’ within the meaning of Article 132(1)(m) of the VAT Directive.”