Flashback on ECJ Cases – C-453/09 (Commission v Germany) – No reduced VAT rate for live animals/horses

On May 12, 2011, the ECJ issued its decision in the case C-453/09 (Commission v Germany).

Context: Failure of a Member State to fulfill obligations – Value added tax – Directive 2006/112/EC – Application of a reduced rate – Live animals normally intended for use in the preparation of food and feed – Supply, importation and purchase of certain live animals, in particular of horses

Article in the EU VAT Directive

Article 96, 98 in the EU VAT Directive

Article 96

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.

Facts & Questions

With its application, the Commission of the European Communities seeks a declaration that the Federal Republic of Germany, by applying a reduced VAT rate to the supply, import and intra-Community acquisition of certain live animals, in particular horses, which are not normally intended for the 96 and 98 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax (OJ L 347, p. 1). with which Annex III (hereinafter: Annex III) has infringed.
Since the Commission took the view that the Federal Republic of Germany, by applying a reduced rate of VAT on the supply, importation and intra-Community acquisition of certain live animals, such as purebred breeding animals, saddle horses and racehorses, carrier pigeons and animals reared for their hair or skin apply, even if these are not usually intended to be used for the preparation of food and feed, have breached their obligations under Articles 96 and 98 of Directive 2006/112 in conjunction with Annex III thereof, she directed that Proceedings according to Art. 226 EC. With a letter of formal notice dated 17 October 2007, the Commission asked this Member State to comment.
In its reply of 17 December 2007, the Federal Republic of Germany confirmed that the national rules for sales of certain live animals provide for a reduced rate of VAT, regardless of the use for which these animals are intended. However, the Federal Republic of Germany argued that this was justified by the principle of fiscal neutrality, since similar goods should be taxed in the same way. The Federal Republic of Germany further explained that live animals form a separate category in Directive 2006/112 alongside food and feed. Finally, she pointed out that a reduced rate of tax on live animals such as riding horses and racehorses may also be applied under No. 11 of Annex III,
On 27 November 2008, the Commission issued a reasoned opinion requesting the Federal Republic of Germany to take the necessary measures to comply with the opinion within two months of the notification of the opinion. In the reasoned opinion, the Commission stated that a comparative interpretation of all language versions of Directive 2006/112 must lead to the understanding that a reduced VAT rate for live animals is only allowed if they are normally used for the production of food and feed would. Nor does the principle of fiscal neutrality speak against such an interpretation, since the group of horse breeds that are used as dressage, show jumping and eventing horses or also sport horses to be distinguished from the group of horse breeds kept as suppliers of meat. Ultimately, the application of the reduced VAT rate for riding, sport and leisure horses cannot be justified by use in agricultural production, because this only includes animal breeding in connection with land cultivation.
After the Federal Republic of Germany, by letter of 2 February 2009, contested that legal assessment and refused to take the measures necessary to comply with the reasoned opinion, the Commission brought the present action.
By order of 22 April 2010, the President of the Court granted the French Republic and the Kingdom of the Netherlands leave to intervene in support of the form of order sought by the Federal Republic of Germany.

AG Opinion

Decision

1. By applying a reduced VAT rate to all deliveries, imports and intra-community acquisitions of horses, the Federal Republic of Germany has violated its obligations under Articles 96 and 98 of Council Directive 2006/112 / EC of November 28, 2006 on the common VAT system violate their Annex III.

Summary

Application of reduced rate – Supply import and acquisition of certain live animals, in particular horses

By applying a reduced VAT rate to the supply, importation and intra-Community acquisition of horses, Germany has failed to fulfill its obligations under Articles 96 and 98 in conjunction with Annex III of the VAT Directive.

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