The Happy Meal Tax Question
Restaurant Services vs. Food Delivery: The EU Court Ruling That Defines VAT for Fast Food
When a Polish McDonald’s franchisee challenged tax authorities, the Court of Justice had to answer a surprisingly difficult question: What exactly are you buying when you order a burger—a product or a service?
The dispute, at its core, concerned a question that most people would never think to ask: What exactly are you buying when you order a Big Mac?
If you eat it at a plastic table inside the restaurant, surrounded by the familiar hum of a fast-food establishment—the beeping fryers, the shuffle of trays, the ambient presence of other customers doing exactly what you’re doing—you are, according to Polish tax authorities, purchasing a restaurant service. But if you take that same Big Mac, wrapped in the same paper, assembled by the same workers from the same ingredients, and carry it out to your car? That, the authorities conceded, might be something else entirely.
The difference, in Poland circa 2016, was three percentage points of value-added tax. Which doesn’t sound like much until you consider that McDonald’s sells a great many hamburgers.
The VAT Audit That Sparked an EU Court Case
The case that wound its way to the Court of Justice of the European Union began with a tax audit. In September 2016, Polish revenue officials examined the VAT returns of a McDonald’s franchisee—identified in court documents only as “J.K.”—covering the first half of that year. What they found displeased them.
J.K. had been treating his takeaway sales as deliveries of “prepared meals and dishes,” a category subject to a reduced VAT rate of five percent under Polish law. The sit-down sales, he acknowledged, qualified as “food-related services,” taxable at eight percent. The tax office disagreed with this bifurcation. In their view, all of it—every Quarter Pounder consumed at a molded plastic booth and every McNugget eaten in a parked Škoda—constituted a restaurant service. The franchisee owed more money.
The authorities’ reasoning went something like this: The meals were prepared on-site from semi-finished products. They were offered hot, ready for immediate consumption. The restaurant provided tables, chairs, napkins, plastic cutlery, access to restrooms. These amenities, in the tax office’s judgment, transformed what might otherwise be a simple sale of goods into something more elaborate—a taxable service, with all the VAT consequences that entailed.
J.K. appealed. He lost before the Regional Administrative Court in Gliwice, which found the tax office’s logic persuasive. He appealed again, to Poland’s Supreme Administrative Court, which found itself uncertain. The questions raised, the court recognized, were not merely Polish questions. They involved the interpretation of European Union law—specifically, the VAT Directive and its enigmatic references to “restaurant and catering services.” And so, in June 2019, the Supreme Administrative Court did what national courts do when they encounter such puzzles: it asked Luxembourg.
How VAT Works: Reduced Rates for Food and Restaurant Services
The value-added tax is one of those European inventions that Americans have, for the most part, managed to avoid. It works by imposing a levy at each stage of production and distribution, with businesses charging VAT on their sales and reclaiming it on their purchases. The consumer, at the end of the chain, bears the full burden. The system is elegant in theory, nightmarish in the details.
One of those details concerns reduced VAT rates. The EU’s VAT Directive permits member states to apply lower rates to certain categories of goods and services deemed essential or socially valuable. Annex III to the directive lists these categories—twenty-four in all—including “foodstuffs” (point 1) and “restaurant and catering services” (point 12a). Both may qualify for reduced rates, but they are distinct categories, and member states are free to treat them differently.
Poland did exactly that. Prepared meals, classified under one statistical code, got the five-percent rate. Food-related services, classified under another, got eight percent. The trouble was that these Polish categories didn’t map neatly onto the EU’s taxonomy. “Food-related services” under Polish classification was broader than “restaurant and catering services” under EU law.
The Supreme Administrative Court wanted to know: What, exactly, does EU law mean by “restaurant and catering services”? And does that meaning control what Poland can tax, and how?
The CJEU Ruling on Restaurant and Catering Services: Customer Choice Is Decisive
The Court of Justice issued its judgment on April 22, 2021, in Case C-703/19. The ruling, while technical in its particulars, contained a core insight that any diner could understand: it depends on what the customer does.
“The concept of ‘restaurant and catering services,'” the Court held, “covers the supply of food together with sufficient support services designed to enable the immediate consumption of that food by the final customer.” So far, so expected. But then came the crucial qualifier:
“Where the final customer chooses not to use the material and human resources made available by the taxable person to accompany the consumption of the food supplied, those resources are not of decisive importance to that customer. Consequently, it must be held, in such a case, that the supply of food is not accompanied by any support service.”
In plain language: if you take it to go, it’s not a restaurant service. The infrastructure—the tables, the chairs, the restrooms, the trash receptacles shaped like cartoon characters—doesn’t matter if the customer doesn’t use it. The VAT classification is defined by the consumer’s choice, not by the seller’s offerings.
What Qualifies as “Support Services” Under EU VAT Law?
The Court’s analysis drew on earlier precedents, particularly a 2011 case called Bog and Others (C-497/09), which involved German cinema operators, party service providers, and mobile snack vendors. In that case, the Court had established that the mere availability of “basic facilities”—standing counters without seating, allowing a limited number of customers to consume food outdoors—didn’t transform a sale of goods into a service. Such facilities were “merely ancillary supplies of a minimal nature” that didn’t change the dominant character of the transaction.
What does matter, the Court explained, is the level of service offered and actually used. The CJEU identified specific factors for determining whether support services are sufficient to constitute restaurant or catering services:
- The presence of waiters
- Service involving the transmission of orders to the kitchen, the arrangement of dishes on plates, and presentation to customers
- The existence of enclosed and temperature-controlled premises for consumption
- The availability of cloakrooms and toilets
- The provision of crockery, furniture, and cutlery
A fast-food restaurant has some of these elements (enclosed premises, toilets, furniture) but lacks others (waiter service, tableside presentation). The Court didn’t resolve whether a fast-food establishment’s offerings constitute sufficient “support services” for eat-in customers—that determination, it said, was for the national court to make. But it provided the framework for analysis and, more importantly, established that the customer’s decision is dispositive for takeaway sales.
Food Preparation Alone Doesn’t Determine VAT Treatment
The Court addressed another argument that tax authorities sometimes advance: that the on-site preparation of hot food transforms a transaction into a service. Not so, Luxembourg said.
The preparation of ready-to-eat food does involve services—cooking, heating, assembling. But if that preparation “is limited essentially to brief and standardised actions” and “usually takes place not at the request of an individual customer but constantly and regularly, depending on demand that is generally foreseeable,” it doesn’t constitute the predominant element of the transaction.
Making a burger isn’t the same as serving one. The assembly-line production of fast food, however skilled, remains incidental to the core transaction: the sale of something to eat.
EU Member States’ Freedom to Set VAT Rates
The ruling also addressed a question of broader significance for tax law across the European Union: How much freedom do member states have in designing their VAT systems?
Considerable freedom, as it turns out. The Court confirmed several important principles:
Flexibility in classification: Member states may classify transactions belonging to different EU categories into a single national category, taxing them at the same reduced rate. They may also apply different reduced rates to goods and services within the same EU category.
No formal distinction required: A member state can group supplies of goods and supplies of services together without formally distinguishing between them, so long as both qualify for reduced rates under the directive.
Fiscal neutrality must be preserved: The principle of fiscal neutrality—which prohibits treating similar, competing goods or services differently for VAT purposes—remains the essential constraint. Similar products cannot be taxed at different rates merely because of arbitrary classification choices.
This flexibility explains why the Polish system, with its idiosyncratic classifications, wasn’t inherently unlawful. A member state can call things what it likes, so long as the underlying transactions qualify for reduced rates under the directive and similar products aren’t treated disparately.
Record-Keeping Requirements for Different VAT Rates
The Court noted one practical consequence of applying different VAT rates to eat-in and takeaway sales: the taxpayer must maintain proper accounting records. Specifically, businesses must preserve copies of all invoices justifying the application of different rates.
For a high-volume fast-food operation, this creates administrative complexity. Every transaction must be categorized correctly at the point of sale—a requirement that explains why many operators prefer, where legally permissible, to apply a single rate to all sales regardless of consumption location.
Practical Implications for the Restaurant and Fast-Food Industry
The CJEU ruling carries significant implications for food service businesses across the European Union:
Takeaway sales qualify as supplies of goods: When customers take food away without using the restaurant’s facilities, the transaction is a supply of foodstuffs, not a restaurant service. This may entitle the sale to a lower VAT rate, depending on national implementation.
Eat-in sales may constitute services: When customers use the premises—tables, seating, climate-controlled space—the transaction more likely qualifies as a restaurant service. But the level of additional service matters; merely providing basic facilities may not be enough.
Customer choice is determinative: The same product, sold at the same price, may attract different VAT treatment depending solely on whether the customer eats in or takes away. Businesses must track this distinction.
Documentation is essential: Operators applying different rates must maintain records sufficient to justify their classification choices in the event of a tax audit.
The Polish Law Change of 2020
There is, of course, a postscript. On July 1, 2020—while the case was still pending before the Court of Justice—Poland changed its law. Under the revised rules, an eight-percent rate now applies broadly to “food-related services” regardless of the previous distinctions. The five-percent/eight-percent split that generated J.K.’s dispute has been largely eliminated.
This doesn’t render the Court’s ruling meaningless. Taxpayers who overpaid during the earlier period may have claims for refunds, and the ruling’s interpretive framework will guide VAT disputes across Europe for years to come. Businesses uncertain about their classification obligations may wish to seek an individual tax ruling to clarify their position.
The Broader Lesson About VAT Classification
More broadly, the case illustrates a truth about tax law that extends well beyond the European Union. The question of what you’re buying—a product or a service, a thing or an experience—often has no natural answer. It is, in a sense, a category error to ask. A hamburger is a hamburger.
But the law demands classifications, and classifications have consequences. Three percentage points of VAT, multiplied across millions of transactions, amounts to real money. Someone has to pay it, and the rules for determining who depend on distinctions that would strike most people as arbitrary.
Is eating a burger at a plastic table fundamentally different from eating it in your car? To the person eating, probably not. To the tax authorities, definitively yes. The Court of Justice, asked to arbitrate, did what courts do: it drew lines, articulated principles, and left the hard cases for someone else to decide.
The next time you’re asked “for here or to go?” you might pause, briefly, to consider that your answer has fiscal implications. Then again, you probably won’t. You just want your lunch.
Author: Robert Nogacki, attorney-at-law, Skarbiec Law Firm
Legal basis:
- Judgment of the Court of Justice of the European Union of April 22, 2021, Case C-703/19, J.K. v. Dyrektor Izby Administracji Skarbowej w Katowicach
- Article 98(2) of VAT Directive 2006/112/EC in conjunction with points 1 and 12a of Annex III
- Article 6 of Council Implementing Regulation (EU) No 282/2011
- Judgment of the CJEU of March 10, 2011, Bog and Others, Joined Cases C-497/09, C-499/09, C-501/09 and C-502/09
Founder and Managing Partner of Skarbiec Law Firm, recognized by Dziennik Gazeta Prawna as one of the best tax advisory firms in Poland (2023, 2024). Legal advisor with 19 years of experience, serving Forbes-listed entrepreneurs and innovative start-ups. One of the most frequently quoted experts on commercial and tax law in the Polish media, regularly publishing in Rzeczpospolita, Gazeta Wyborcza, and Dziennik Gazeta Prawna. Author of the publication “AI Decoding Satoshi Nakamoto. Artificial Intelligence on the Trail of Bitcoin’s Creator” and co-author of the award-winning book “Bezpieczeństwo współczesnej firmy” (Security of a Modern Company). LinkedIn profile: 18 500 followers, 4 million views per year. Awards: 4-time winner of the European Medal, Golden Statuette of the Polish Business Leader, title of “International Tax Planning Law Firm of the Year in Poland.” He specializes in strategic legal consulting, tax planning, and crisis management for business.
