Flashback on ECJ Cases – C-108/11 (Commission v Ireland) – No reduced VAT rate for greyhounds and horses not normally intended for the preparation of foodstuffs

On March 14, 2013, the ECJ issued its decision in the case C-108/11 (Commission v Ireland).

Context: Failure of a Member State to fulfil obligations – VAT – Reduced rate – Supply of greyhounds and horses not intended for the preparation or production of foodstuffs for human or animal consumption, hire of horses and insemination services – Directive 2006/112/EC – Infringement of Articles 96, 98, read in conjunction with Annex III, and 110

Article in the EU VAT Directive

Article 96, 98, 110 in the EU VAT Directive

Article 96 (VAT Rates)

Member States shall apply a standard rate of VAT, which shall be fixed by each Member State as a percentage of the taxable amount and which shall be the same for the supply of goods and for the supply of services

Article 98

1. Member States may apply either one or two reduced rates.

2. The reduced rates shall apply only to supplies of goods or services in the categories set out in Annex III. The reduced rates shall not apply to electronically supplied services.

3. When applying the reduced rates provided for in paragraph 1 to categories of goods, Member States may use the Combined Nomenclature to establish the precise coverage of the category concerned.

Article 110

Member States which, at 1 January 1991, were granting exemptions with deductibility of the VAT paid at the preceding stage or applying reduced rates lower than the minimum laid down in Article 99 may continue to grant those exemptions or apply those reduced rates. The exemptions and reduced rates referred to in the first paragraph must be in accordance with Community law and must have been adopted for clearly defined social reasons and for the benefit of the final consumer.

Facts & Questions

The applicant claims that the Court should:

Declare that by applying a VAT rate of 4.8% to supplies of greyhounds and horses not normally intended for the preparation of foodstuffs, to the hire of horses and to certain insemination services, Ireland has failed to comply with its obligations under Articles 96, 98 (in conjunction with Annex III) and Article 110 of Council Directive 2006/112/EC¹ of 28 November 2006 on the common system of value added tax; order Ireland to pay the costs.

Pleas in law and main arguments

Under article 96 of the VAT directive, the standard rate of VAT fixed by each Member State, subject to a minimum rate of 15%, is applicable to all supplies of goods and services. A rate other than the standard rate may be applied only in so far as that is permitted by other provisions of the directive.

Article 98 provides that Member States may apply one or two reduced rates to the supplies of goods and services listed in Annex III to the directive. The supplies now in issue do not appear in Annex III.

The VAT directive also contains transitional provisions which permit Member States to continue to apply rates which derogate from the general rules on the structure and level of rates contained in the directive, if the relevant national provisions were in force on 1 January 1991.

Under article 113 of the VAT directive, where a Member State applied, on 1 January 1991, a reduced rate lower than the minimum laid down in article 99, it may apply to those goods and services one of the reduced rates provided for in article 98. However, since the rate applied by Ireland to the goods and services now in issue is lower than the minimum set out in article 99 of the VAT directive, article 113 can be of no avail.

Article 110 of the directive also applies to rates lower than the minimum laid down in article 99. It lays down a transitional arrangement for certain national measures adopted for clearly defined social reasons (i.e. to reduce the tax burden levied on consumption of goods and service which cover basic social needs) and for the benefit of the final consumer. The Commission submits that the supply of horses and greyhounds (other than for use in the preparation of foodstuffs), the hire of horses and insemination services cannot be deemed to be necessary in order to cover basic social needs. The Commission also submits that, since a large proportion of horses and greyhounds are intended for racing or breeding, the benefit of the measure cannot be considered as lying with the final consumer.

AG Opinion

None

Decision

The Court:
Declares that, in applying a reduced rate of value added tax of 4.8% to supplies of greyhounds and horses not intended for the preparation of foodstuffs, to the hire of horses and certain insemination services, Ireland has failed to fulfil its obligations under Articles 96, 98, read in conjunction with Annex III, and 110 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax;

Personal comments/VATupdate

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