Whether the amounts retained by a hotel operator in the event of a no-show are subject to VAT has been the subject of several reversals in case law. The principle laid down by the CJEU in 2007 (Société Thermale d'Eugénie-les-Bains, C-277/05) treated retained deposits (arrhes) as compensation for breach of contract, outside the scope of VAT. However, the CJEU ruling of 23 December 2015 (Air France-KLM, C-250/14 and C-289/14) took the opposite view for unused tickets, holding that the service is made available even where it is not used. The Conseil d'État, in two decisions of 9 October 2024 (Société Hôtelière Paris Eiffel Suffren and Société AccorInvest), transposed this reasoning to the hotel industry: amounts retained in the event of a no-show are subject to VAT, unlike deposits paid under a cancellation right. This page summarises the analytical framework resulting from that case law.
The founding judgment of the CJEU of 18 July 2007 (Société Thermale d'Eugénie-les-Bains, C-277/05) established a clear distinction: deposits (arrhes) paid by a client and then retained in the event of cancellation constitute fixed compensation for the breach of the contract. They do not remunerate any service and are therefore outside the scope of VAT. That decision governed French hotel practice for many years.
The reversal came with the CJEU ruling of 23 December 2015 (Air France-KLM, C-250/14 and C-289/14). Ruling on unused airline tickets, the Court held that the passenger purchases the right to benefit from the transport service, and that the service is deemed to be supplied once the airline has enabled the passenger to benefit from it, whether used or not. As a result, the amounts retained are consideration for a taxable supply.
The Conseil d'État, on 9 October 2024, transposed this reasoning to the hotel industry in two concurring decisions (Société Hôtelière Paris Eiffel Suffren and Société AccorInvest): amounts retained by a hotel operator in the event of a no-show are consideration for a room made available to the client, whether or not it was actually occupied. They are therefore subject to VAT at the rate applicable to accommodation services (10%). The Conseil d'État nonetheless maintained the distinction: deposits (arrhes) paid under a client's cancellation right (a termination authorised by the contract) remain outside the scope of VAT.
Applying the framework requires a careful analysis of the contractual nature of the amount retained by the hotel operator.
The client booked (with or without prior payment of a guarantee) and then failed to arrive. The room was made available on the agreed date. The amount retained by the hotel operator (whether the full price or a fixed advance defined in the contract) is consideration for a supply within the meaning of the Conseil d'État decisions (9 October 2024): VAT is due at the 10% rate.
The client paid a deposit (arrhes) under a cancellation right provided for in the contract (for example: cancellation free of charge until D-7, then forfeiture of the deposit). If the client cancels by exercising that right, the retained amount keeps its character of fixed compensation (CJEU 2007, position maintained by the CE in 2024). No VAT is due.
Where the client paid a non-refundable advance (the "non-refundable" clause used by booking platforms) and then failed to arrive, the retained amount falls within the scope of VAT according to the Conseil d'État decisions of 9 October 2024. The fact that the room was made available prevails over the ex ante labelling of the amount as a deposit. The distinction rests on the nature of the right exercised by the client, not on the label given to the sum.
The client cancels shortly before the agreed date and the hotel operator retains part or all of the price as late cancellation fees. The treatment depends on the characterisation: if the contract provides for fixed compensation for breach (rather than remuneration for a room made available), the amount may remain outside the scope of VAT. In practice, however, the tax authorities and the Conseil d'État tend to consider that a room booked and blocked has been made available.
Where the booking is made through a platform, the contract often binds the client to the platform and the platform to the hotel operator. The VAT treatment of retained amounts follows the characterisation of the contractual flow between the parties. A case-by-case analysis is required, based on the general terms and the intermediation model (agent or commissionaire within the meaning of art. 256 V of the French Tax Code).
The firm advises hotel operators, tourist residences, platforms and para-hotel operators on updating their general terms and conditions and their VAT treatment policy in light of the Conseil d'État decisions of 9 October 2024. Contract drafting is essential: the characterisation (deposit / non-refundable advance / cancellation fees) must be consistent with the VAT treatment applied.
For pending disputes (past reassessments or positions called into question by the 2024 decisions), the firm builds the defence on the grounds of contractual characterisation, the scope of the case law and legal certainty.
Yes, since the two decisions of the Conseil d'État of 9 October 2024 (Société Hôtelière Paris Eiffel Suffren and Société AccorInvest). Where the client booked and then failed to arrive, the room was made available on the agreed date. The amounts retained by the hotel operator are consideration for a taxable supply, subject to VAT at the 10% rate (French Tax Code, art. 279, a).
Deposits (arrhes) paid under a contractual cancellation right and retained when that right is exercised remain characterised as fixed compensation for breach. They remain outside the scope of VAT, in line with the 2007 CJEU case law (Société Thermale d'Eugénie-les-Bains), a position maintained by the Conseil d'État on 9 October 2024.
The test is the nature of the right exercised by the client. In a no-show, the client exercises no contractual right: they simply fail to honour their commitment, and the room was made available (VAT due). In a cancellation with a deposit, the client exercises a cancellation right provided for in the contract: the termination occurs in advance, the hotel operator did not make the room available on the agreed date, and the retained amount is compensation (no VAT).
An advance labelled "non-refundable" in a platform's general terms is, in the event of a no-show, subject to the same regime as the full price: since the room was made available, VAT is due. The ex ante labelling of the amount ("deposit", "advance", "non-refundable") is not decisive. What prevails, according to the Conseil d'État, is the factual nature of the retained amount (consideration for a room made available, or a sanction for breach).
The applicable rate is that of accommodation services, i.e. 10% (French Tax Code, art. 279, a). This is the same rate as the one applied to the night's stay itself. The consistency is logical, since the retained amount remunerates, under the case law, the same supply as the one that would have been provided had the client arrived.
The decisions have no suspensive effect on earlier disputes; they apply to pending cases. For operators who historically treated no-shows as outside the scope of VAT and who now face a reassessment, several lines of defence remain available: a precise characterisation of the contractual flow (the decisions did not necessarily settle every scenario), reliance on legal certainty for periods prior to the ruling, and negotiation of the scope of the reassessment.
Three areas to update: (1) clearly distinguish deposits linked to a cancellation right (no VAT) from advances / non-refundable payments linked to a room made available (VAT due); (2) document the timetable for permitted cancellations and their consequences; (3) align invoicing with the tax treatment (an explicit VAT statement where it applies). The firm offers an audit of hotel general terms and an update kit.
Topics frequently linked to VAT on no-shows.
Overview: characterisation, para-hotel services, Dutreil, transfers.
Voir la page VATRegime, criteria, CE decision of 12 November 2025 and doctrinal clarifications.
Voir la page Hotel industryClassic pitfalls: SCI/operator, VAT election, right to deduct.
Voir la page PlatformsTax regime for short-term rentals and platforms.
Voir la pageA confidential initial discussion to audit your general terms, characterise your flows and adapt your VAT treatment following the Conseil d'État decisions of 9 October 2024.
Written by
Me François Ouairy, avocat associé en charge du bureau de Paris, expert en fiscalité immobilière, fiducie et fiscalité financière.
© BENSAID Avocats — The information on this site does not constitute legal advice and is no substitute for personalised tax analysis.