Loyalty programs: Deductibility of the VAT invoiced by participating companies

Marriott Rewards LLC, a company established in the US, manages the loyalty program of the Marriott hotel group which enables hotels of the group to issue loyalty points to their customers. When the latter use their points, the hotels invoice Marriott Rewards LLC the nights provided to customers or free upgrades under the loyalty program.

Marriott Rewards LLC requested a refund of the VAT mentioned on these invoices. After succeeding before the Montreuil administrative court and the Versailles administrative appeal court, the Conseil d’Etat cancelled the judgment which held that there was a direct link between the benefits of the members of the program and the manager’s activity, thus authorizing the VAT recovery based on the overhead costs theory.

The Conseil d’Etat considered that the loyalty program managers’ right to deduct VAT had already been resolved by the LMUK and Baxi Group CJEU case law (C-55/09) and held that payments made by the manager should be considered as the counterpart to the operations carried out by the members for the benefit of their customers. Consequently, the related VAT cannot be recovered. Only VAT relating to a supply separate from the accommodation provision rendered to the program manager would be eligible for VAT recovery.

The case has been referred to the Versailles Administrative Appeal Court. The referral decision will need to be closely studied as it will enable to determine if there is, apart from the accommodation provision, another service supply (such as commercial cooperation, potentially outside the territorial scope of French VAT).

Michel Guichard

Michel Guichard, Partner, leads the Indirect Tax activity. With more than 30 years’ experience in International and French Tax law, he advises his clients on indirect tax matters. Michel is […]

Odile Courjon

Odile Courjon, Partner, has developed a strong expertise in indirect tax issues (VAT, wage taxes, excise taxes, export control and customs) in France and overseas. She advises her clients in […]

Bertrand Jeannin

Bertrand Jeannin, Partner, supplies strategic and technical advice to French and foreign multinational groups in all aspects of their VAT and customs policies. He regularly assists his clients in the […]

William Stemmer

William Stemmer, Partner, has more than 20 years’ experience in Indirect Tax matters. William particularly specializes in the real estate sector. William carries out many training courses on VAT aspects […]

Nicolas Kazandjian

Barrister registered with the Hauts-de-Seine Bar, he started my career in the indirect tax service line of Deloitte Taj in 1999. My current position is Director. My area of expertise […]

Vanessa Irigoyen

With more than 16 years of experience, Vanessa has extensive expertise in the implementation of international efficiency business models for customs, export control and indirect tax purposes. Her functions notably […]

Anne Gerometta

Anne Gerometta is Indirect Tax Partner of Deloitte France | Taj. She advises international groups on their indirect tax issues. Anne notably assists operators from the Financial Sector – bank, […]

Delphine Nicault

Delphine Nicault is an Attorney-at-Law at the French Bar. She joined Deloitte in 2002 and assists her clients on day-to-day VAT issues. She developed an expertise in the VAT and […]