On June 4, 2015, the ECJ issued its decision in the case C-678/13 (Commission vs. Poland)
Context: State failure – VAT – Directive 2006/112/EC – Annex III – Application of a reduced rate of VAT to medical equipment, auxiliary equipment and other devices as well as to pharmaceutical products
Articles in the EU VAT Directive
Articles 96, 97, 98 of the EU VAT Directive 2006/112/EC.
Article 96 (Standard VAT rate)
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 97 (Standard VAT rate)
The standard rate shall not be lower than 15 %.
Article 98 (Reduced VAT rate)
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 with the exception of those falling under point (6) of Annex III.
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 99 ( (Reduced VAT rate)
1. The reduced rates shall be fixed as a percentage of the taxable amount, which may not be less than 5 %.
2. Each reduced rate shall be so fixed that the amount of VAT resulting from its application is such that the VAT deductible under Articles 167 to 171 and Articles 173 to 177 can normally be deducted in full.
3. By way of derogation from paragraphs 1 and 2 of this Article, and in addition to the rates referred to in paragraph 1 of Article 98, Member States which, on 1 January 2017, applied, in accordance with Union law, reduced rates lower than the minimum laid down in this Article or granted exemptions with deductibility of the VAT paid at the preceding stage to the supply of certain goods referred to in point (6) of Annex III, may also apply the same VAT treatment where that supply is supplied electronically, as referred to in point (6) of Annex III.
Facts
Form of order sought
The applicant claims that the Court should:
declare, on the basis of the first paragraph of Article 258 TFEU, that, by applying a reduced rate of VAT to, inter alia, supplies of:
medical equipment, aids and other appliances which are not intended for the exclusive personal use of disabled persons and/or which are not normally intended to alleviate or treat disability;
products such as, inter alia, disinfectants, products and preparations for pharmaceutical use, as well as spa products, which are not pharmaceutical products of a kind normally used for health care, prevention of illnesses or as treatment for medical and veterinary purposes, or products used for contraception and sanitary protection,
mentioned in Annex 3 to the Polish Law on VAT with reference to medical equipment, medical goods and pharmaceutical products, the Republic of Poland has failed to fulfil its obligations under Articles 96 to 98 of the VAT Directive, 1 in conjunction with Annex III to that directive;
order the Republic of Poland to pay the costs of the proceedings.
Pleas in law and main arguments
In support of its action the Commission submits that the Republic of Poland applies a reduced rate of VAT to goods which do not belong in any of the categories of goods mentioned in Annex III to the VAT Directive. Those goods must, however, be made subject to tax at the standard rate as they cannot come within the scope of the exception provided for in Article 98(2) of the Directive.
In the Commission’s view, the goods in issue cannot be classified as being either pharmaceutical products of a kind normally used for health case, prevention of illnesses and as a treatment for medical and veterinary purposes, or as equipment normally intended to alleviate or treat disability, for the exclusive personal use of disabled persons. Furthermore, several categories of goods covered by the reduced rate of VAT pursuant to the Polish provisions are unclear or formulated imprecisely, thereby making it impossible to determine which goods are in fact involved.
Decision
1) By applying a reduced value added tax rate to deliveries:
– medical equipment, auxiliary materials and other devices which are not reserved for the personal and exclusive use of disabled persons or which are not normally intended to alleviate or treat disabilities, as well as
– products which are not pharmaceutical products normally used for health care, disease prevention and treatment for medical and veterinary purposes, nor products used for the purposes of contraception and feminine hygiene protection,
referred to in positions 82, 92 and 103 of Annex No. 3 to the Law on Goods and Services Tax (ustawa o podatku od towarów i usług) of 11 March 2004, the Republic of Poland has failed to obligations incumbent upon it under Articles 96 to 98 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax, read in conjunction with Annex III to said Directive.
2) The remainder of the appeal is dismissed.
3. Orders the European Commission and the Republic of Poland to bear their own costs.
Summary
Application of a reduced VAT rate on medical equipment, aids and other devices as well as on pharmaceutical products
By applying a reduced VAT rate to supplies of:
– medical equipment, aids and other appliances which are not intended for the exclusive personal use of the disabled or are not normally intended for the alleviation or treatment of disabilities, and
– products which are not pharmaceutical products of a type normally used for health care, the prevention of diseases or for medical and veterinary treatment, and are not contraceptives and products intended for the hygienic protection of women,
Poland has failed to fulfill its obligations under Articles 96 to 98 of the VAT Directive in conjunction with its Annex III.
Source
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