Fast-Food Combo Meal VAT Case: BFH Sides with Tax Office Against Baden-Württemberg Restaurant Owner
Customers cannot face higher prices for goods under savings plans compared to individual purchases, ruled the Federal Financial Court. - Bank Savings Account Burger Cost Capped at Retail Price by Federal Finance Court
When it comes to buying a combo meal - say a burger, fries, and a drink - most customers, busy with their day, don't pay much mind to the price breakdown. Yet, for the restaurant operator and the tax office, it's a whole different ball game. Why? Because unlike food, drinks incur a heftier 19% VAT compared to the 7% on food items. That's why it's crucial for the restaurant to keep the drink's proportion in the combo meal price as low as possible to pay less VAT.
The restaurant proprietor in question operates two fast-food joints in Baden-Württemberg. His novel approach to pricing the combo meals, what he calls the "food-and-paper method," bases the price on the individual purchase prices, often substantially higher for food than drinks. This strategy led to the burger costing more in the combo meal than when sold individually.
Recently, the BFH (Federal Fiscal Court) seemingly sided with the tax office, dismissing the restaurant owner's appeal. The tax office argued that the combo meal price should instead be divided in proportion to each item's individual selling price. Consequently, in this specific case, our fast-food mogul must adjust his pricing strategy, but other methods could be allowed under specific conditions, providing they are appropriate and not overly complex.
While a ruling tailored to this particular case seems clear, the guidelines for pricing combo meals in the future remain somewhat cloudy. The European VAT directives and national regulations set the ground rules, but the intricacies of applying VAT to combo meals involving items with different tax rates can lead to ambiguity. In this dynamic tax landscape, it's essential for restaurants to stay informed and adapt their strategies accordingly. Or risk ending up in a similar predicament, with the BFH and the tax office knocking at your door.
The BFH's decision in favor of the tax office highlights the importance of understanding VAT implications when pricing combo meals, as the high VAT rate on drinks compared to food can significantly impact finance. This ruling leaves the future pricing strategies for combo meals in a somewhat uncertain lifestyle, requiring restaurants to be well-informed about food-and-drink VAT regulations and ensure their business remains compliant to avoid any potential legal disputes.
