Belgian sex shop must pay full tax rate: court

Thu Mar 18, 2010 11:01am EDT
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BRUSSELS (Reuters Life!) - European judges have ruled that a sex shop with movie cubicles does not qualify for a reduced rate of sales tax because it is not a cinema.

The decision by the European Court of Justice -- Europe's highest court -- follows a dispute in Belgium involving a sex shop which levied value-added tax of 6 percent on its activities rather than the standard rate of 21 percent.

The owner of the coin-operated Erotic Center in Bruges argued his business qualified for the lower rate -- which applies to cinemas in Belgium -- because it allowed customers to pay money to watch one or more movies.

The court ruled the Erotic Center's cubicles did not meet the definition for a reduced VAT rate, which states that an establishment must be "available to the public on prior payment of an admission fee giving all those who pay it the right collectively to enjoy the cultural and entertainment services."

Thursday's ruling means the sex shop owner is liable for more than 50,000 euros ($68,000) in evaded VAT payments and corresponding fines from the Belgian tax authorities.

(Writing by Luke Baker; Editing by David Brunnstrom)