Services Provided by a Gym During the COVID-19 Lockdown
The Federal Fiscal Court of Germany (BFH) clarified that continued payment of membership fees to a gym that was closed due to pandemic-related restrictions constitutes a taxable exchange of services.
In two cases, the BFH addressed the impact of government-ordered closures of gyms during the COVID-19 lockdown on the VAT treatment of membership fees (BFH rulings dated 13 November 2025, cases no. XI R 5/23 and XI R 36/22).
In the cases ruled on, regular training activities could not take place in the gyms’ premises for several months due to pandemic-related closures. During this period, alternative services were offered, such as online classes, customized training plans and telephone support. Additionally, members were informed that the period of closure would be compensated at the end of their membership term by granting free additional months.
Many members continued to pay regular membership fees during the period of closure.
With regard to the VAT treatment of these membership fees, it was disputed whether there was an exchange of services between the gym operators and the members during the lockdown.
Classification under Civil Law
From a civil law perspective, the German Federal Court of Justice (BGH) had already ruled in a similar case that gym services could not retrospectively be made up for in the case of pandemic-related closures. Therefore the operator is released from their obligation provide services in accordance with civil law regulations. At the same time, members were entitled to a refund of their monthly fees (BGH ruling dated 4 May 2022, case no. XII ZR 64/21).
Free Additional Month Constitutes an Exchange of Services
The decisive factor for the VAT treatment of membership fees during the lockdown is the question of whether there is an exchange of services between members’ payments and the services provided by the gym. According to the BFH, this must be decided independently of the assessment under civil law.
The BFH states that the provision of free additional months after the expiry of the originally agreed contract term constitutes a consumable benefit. The exchange of services under VAT law results from the economic connection between the membership fees collected in advance by the entrepreneur and the consumable benefit in the form of the free additional months.
Such an exchange of services exists even if no legally binding agreement regarding the additional months was made between the customer and the gym operator.
Membership Fees as Advance Payments
Even regardless of the free additional month, the BFH concluded that the continued payment of membership fees is subject to VAT. Even if the gym operator did not render services to the members due to the impossibility of service provision caused by the COVID-19 lockdown, the fees collected were at least considered advance payments for taxable monthly partial services under a long-term contractual relationship.
In this context, the BFH referred to established case law from both the BFH and the European Court of Justice (ECJ) regarding the reduction of the taxable amount : A reduction of the taxable amount under Sec. 17 para. 2 no. 2 German Value Added Tax Act in conjunction with Sec. 17 para. 1 sentence 1 German Value Added Tax Act due to a partial service not rendered shall also occur in the case of inability to render the service only when the advance payment made for this purpose is actually refunded. The existence of a refund claim alone does not justify a reduction of the taxable amount.
The fact that customers had a civil law claim for repayment of fees for services that were not provided — namely, the use of all gym facilities during the closure — does not in itself suffice to reduce the taxable amount (ECJ ruling of 13 March 2014, case C-107/13, FIRIN; BFH ruling of 19 July 2007, case np. V R 11/05, Federal Tax Gazette II 2007, p. 966 ).
Note: It remains unclear to what extent the alternative services offered by the gyms, such as online courses, the creation of training plans and telephone services, constituted a VAT-relevant exchange of services.
Recommendation for Action
With these two decisions, the BFH has issued a clarification after previous conflicting decisions from first instance tax courts (Fiscal Court of Hamburg ruling of 16 February 2023, case no. 6 K 239/21 No exchange of services; contrary view held by Schleswig-Holstein Fiscal Court 16 November 2022, case no. 4 K 41/22)
As many gyms were in situations comparable to those in the court rulings during the COVID-19 lockdown, businesses in the fitness sector should now examine the specific implications these BFH decisions may have on any outstanding VAT assessments.
Other businesses in sectors also affected by pandemic-related closures — such as arts and cultural institutions — should likewise carefully assess the extent to which the BFH's findings may be applicable to them.
The decisions clearly underline the BFH’s tendency to assume a taxable service in cases of payments received — even if the originally agreed-upon service was not rendered. In a similar context, the BFH previously ruled against an airline that did not refund airfare for unused flights (BFH ruling of 15 September 2011, case no. V R 36/09, Federal Tax Gazette II 2012, p. 365). The BFH also considers payments to be subject to VAT in cases of accidental overpayment or duplicate payments by the service recipient, provided the excess amount is not refunded (BFH ruling dated 19 July 2007, case no. V R 11/05, Federal Tax Gazette II 2007, p. 966).
Contact
