Taxation KHO: Toys for burger meals are subject to general VAT

The fast food restaurant had treated children’s meal toys as a sale at a reduced rate of 14 percent.

Fast food restaurant must be subject to normal VAT on the sale of toys sold with children’s burgers, according to the Supreme Administrative Court (KHO).

According to a decision published by the Supreme Administrative Court on Monday, the company must pay VAT on the sale of a children’s meal toy at the standard rate of 24%, as the meal and the toy cannot be considered as a single entity for VAT purposes.

The decision of the Supreme Court was made by a vote of 3–2.

The restaurant company processed all of the children’s meals for the 2015 tax period as sales at a reduced rate of 14 percent.

The company had previously treated children’s meals as sales at a rate of 14% for food and beverage products and sales at a rate of 24% for toys, but changed its policy in 2015.

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In 2018, the tax administration considered that the company could apply a reduced rate of 14 percent to the sale of children’s meals in its entirety. In 2020, the Tax Adjustment Board also approved the arrangement.

In 2021, the Helsinki Administrative Court annulled the decisions of the Tax Administration and Tax Adjustment Board. The restaurant company appealed the decision of the administrative court.

In practice The question to be resolved by the Supreme Administrative Court was whether the children’s burger meal was a single performance or whether the toy was a separate performance.

According to the restaurant company, the toy included in the children’s meal is always a “low-value toy based on the current campaign, the purpose of which is to keep the child interested in the toy during meals”.

“This will allow both the child and the rest of the party to enjoy the meal in the best possible conditions, and the toy should not be considered an end in itself,” the company justified according to the Supreme Court’s decision.

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The company believes that a food meal and a toy constitute an indivisible financial performance that is artificially divided into parts.

KHO however, the toy included in the children ‘s meal could not be regarded as a so – called gift given when the meal was purchased.

The court drew attention to the fact that the restaurant company also sells children’s meals without the toy and the toy separately. According to the law, the share of the toy has thus been taken into account in the company’s meals and the price of children’s meals.

The Supreme Administrative Court also did not consider the share of the toy in the price of the children’s meal to be small.

The court held that the sale of a toy could not be regarded as an “independent by-product” which was merely “a means of enjoying catering in the best possible conditions”.

“From the point of view of the average consumer buying a children’s meal, the toy must be considered an end in itself,” the Supreme Administrative Court estimates.

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