Case: Polish input tax block considered

European Court of Justice (Eighth Chamber),

F. Biltgen, President of the Chamber, J. Malenovský and L.S. Rossi (Rapporteur), Judges,

Judgement delivered 2 May 2019

Value added tax (VAT) — Deduction of input tax — Sixth Directive 77/388/EEC — Article 17(2) and (6) — Directive 2006/112/EC — Articles 168 and 176 — Exclusion from the right to deduct — Purchase of overnight accommodation and catering services — Standstill clause — Accession to the European Union

Grupa Lotos S.A. v Minister Finansów


Grupa incurred VAT on the purchase of overnight accommodation and catering, some of which it used itself and some of which it recharged to subsidiary companies.

When Poland joined the EU (1 May 2004) recovery of input tax incurred on overnight accommodation and catering was blocked unless i) the claimant was providing tourism services or ii) the claimant was supplying ready meals on passenger transport. The first exception to the block was repealed on 1 December 2008. Thus, in 2014, when Grupa incurred the disputed VAT, it was not permitted to recover it because all input tax incurred on overnight accommodation and catering was blocked.

Grupa argued that, because the accommodation was recharged to subsidiaries, it was providing tourism services and therefore under the pre 1 December 2008 VAT rules it would have been entitled to input tax recovery. It further argued that, although the Sixth Directive and Principle VAT Directive, contained standstill provisions which entitled member states to retain the input tax blocks they had on ascension to the EU, Poland was not entitled to extend restrictions on input tax recovery. Grupa could therefore rely on the pre 1 December 2008 rules and recover the input tax.

The ECJ confirmed that Poland was not permitted to extend the scope of the input tax block to remove the right of suppliers of ‘tourism services’ to recover VAT incurred on accommodation catering. However, the ECJ was not convinced that Grupa was providing tourism services (para 38) and it confirmed that Poland was permitted to operate a ‘general’ input tax block on businesses other than those providing tourism services.

The ECJ did not consider whether the services recharged by Grupa were subject to the TOMS.


This case will have little impact in the UK. It may be of interest in countries which have more recently ascended to the EU and are in the process of aligning their national VAT legislation with the Principle VAT Directive.

For commentary on input tax recovery when expenditure is incurred on ‘luxuries, amusement and entertainment’ see In-depth commentary at ¶19-600.

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