Flashback on ECJ Cases – C-441/09 (Commission v Austria) – No reduced VAT rate to all deliveries, imports and intra-Community purchases of horses

On May 12, 2011, the ECJ issued its decision in the case C-441/09 (Commission v Austria).

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 acquisition of certain live animals, in particular of horses

Article in the EU VAT Directive

Article 96, 98 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.

Facts & Questions

With its application, the Commission of the European Communities seeks a declaration that the Republic of Austria, by applying a reduced rate of VAT 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, by applying a reduced rate of VAT to the supply, importation and intra-Community acquisition of live animals such as horses, donkeys, mules, cattle, pigs, sheep, goats and domestic poultry, the Republic of Austria even if these are not usually intended to be used for the preparation of food and feed, breached its obligations under Articles 96 and 98 of Directive 2006/112 in conjunction with Annex III thereof, it continued the procedure 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 14 January 2008, the Republic of Austria confirmed that the national rules for transactions in certain live animals provide for a reduced rate of VAT, irrespective of the use for which those animals are intended. However, the Republic of Austria argued that the wording of Directive 2006/112 lists live animals as a separate category alongside food and feed. The Republic of Austria also stressed that it was difficult to make a distinction based on the intended use of the animals. Finally, she pointed out that the 2000 sales tax guidelines only included animals that could also be used as food anyway.
On 27 November 2008, the Commission issued a reasoned opinion requesting the Republic of Austria 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. Since the intended use of live animals is known at the time of sale and is sometimes even specified by the animal species or breed, it does not seem comprehensible
After the Republic of Austria, by letter of 29 January 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 21 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 Republic of Austria.

AG Opinion

None

Decision

1. The Republic of Austria has violated its obligations under Articles 96 and 98 of Council Directive 2006/112/EC of November 28, 2006 on the common VAT system by applying a reduced VAT rate to all deliveries, imports and intra-Community purchases of horses in connection with Annex III thereof.

2. The Republic of Austria bears the costs.

3. Order the French Republic and the Kingdom of the Netherlands to bear their own costs.

Summary

Reduced Rate – Supply, import and acquisition of certain live animals, especially horses

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

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