The difference between hospitality service and delivery of food items

Many hospitality businesses offer not only a restaurant but also a home delivery service. The Federal Court has decided that an accounting separation suffices to claim the reduced value-added tax rate for food deliveries.

Differentiation between hospitality service and delivery of food

The VAT law distinguishes between the sale of food and the provision of hospitality services. While the mere delivery of food is subject to the reduced VAT rate of 2.5 percent, hospitality services are subject to the standard tax rate of 7.7 percent. A service is considered a hospitality service if the taxable person prepares or serves the food at the customer's location, or if special facilities are provided for on-site consumption. For instance, the home delivery of pizzas is merely a delivery of food. However, the takeaway sale becomes a hospitality service if there are tables next to the sales outlet where the pizzas can be consumed. Therefore, no actual service, as commonly understood by the public, is necessary for it to qualify as a hospitality service.

Organizational separation suffices

Most pizzerias offer both a traditional restaurant and a home delivery service. Which tax rate applies in these cases? According to the wording of Art. 25 Para. 3 VAT Act, the reduced VAT rate for the delivery of food only applies if suitable organizational measures have been taken to separate these revenues from those of the hospitality services. In BGE 123 II 16, the Federal Court clarified what suitable measures consist of. Specifically, a mere organizational separation is sufficient to ensure effective tax control. A spatial separation is not required. A pizzeria can meet the requirement of organizational control simply by keeping separate accounts for the restaurant and delivery service. Separate premises can certainly help to distinguish between the different revenues. However, businesses with mixed activities are not required to operate spatially separated outlets to claim the reduced rate. Such a requirement would be disproportionate in terms of costs.

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