5.1.
In the view of the Court of Appeal, the District Court rightfully and on valid grounds determined that the general tax rate applies to the sale of magic truffles. The Court of Appeal supplements these grounds as follows.
5.2.
According to both the Court of Justice of the European Union (CJEU) judgment previously cited by the District Court (CJEU, 1 October 2020, C-331/19, ECLI:C:EU:2020:786 (X)), and the Supreme Court judgment (Supreme Court, 18 December 2020, ECLI:NL:HR:2020:2082, BNB 2021/28), it is not only important whether certain foodstuffs provide necessary nutrients to humans, but also the purpose for which these foodstuffs are consumed. If the foodstuffs are exclusively consumed for a purpose other than the intake of essential nutrients, they do not qualify as foodstuffs within the meaning of Annex III of the VAT Directive, and the reduced tax rate cannot be applied to their sale.
5.3.
Although magic truffles, as argued by the appellant, contain necessary nutrients, they are exclusively consumed for a purpose other than the intake of these nutrients. Magic truffles are consumed solely for their hallucinogenic effects. Due to these effects, magic truffles can only be consumed in small quantities, making the intake of essential nutrients through them negligible. The consumption of magic truffles cannot be compared to, for example, edible mushrooms or other vegetables. Therefore, magic truffles are not similar to the products with which the appellant compares them. Consequently, the reduced tax rate cannot be applied to the sale of magic truffles.
5.4.
The Court of Appeal finds it important to note that magic truffles gained popularity in the Netherlands after the sale of mushrooms was banned in 2008. Based on the description provided by the appellant regarding the magic truffles offered, it can be inferred that magic truffles are sold and consumed for their psychedelic or mind-expanding effects. Ingesting magic truffles leads to hallucinations, heightened perception of colors, intensified auditory experiences, and similar effects. The description of the magic truffles, for instance, states: “Expect a majestic trip with strong visuals, intense feelings and deep thoughts. (…) Users should prepare themselves for a full-on tripping experience filled with strong visuals, high-introspectivity and everything else you can expect from a great magic truffle trip.” Furthermore, the description of the magic truffles includes several warnings, such as: “Each person reacts differently to the effects of psilocybin and psilocin. It is recommended to eat a little Magic Truffles at first to determine how sensitive you are. Do not take Magic Truffles when depressed. Do not use Magic Truffles under the age of 18. And it is of course not advised to drive if you are under the influence of Magic Truffles.” It is unlikely that an average consumer, experiencing hunger or appetite, would choose magic truffles.
5.5.
The appellant provided a label stating that the product is considered a consumable item under the meaning of the Commodities Act. However, the label does not provide any information regarding the nutritional value of magic truffles. It only indicates that sales to individuals under 18 years old are not permitted and that use by specific individuals under certain circumstances is not recommended.
5.6.
The Court of Appeal considers the exclusion of magic truffles from the reduced tax rate to be in line with the objective that the EU legislator intended to achieve with Annex III of the VAT Directive. The EU legislator aimed to subject only essential goods to the reduced VAT rate to make them more accessible to end consumers. Given that magic truffles are mainly consumed for their hallucinogenic effects, they do not qualify as essential goods (CJEU, 1 October 2020, C-331/19, ECLI:C:EU:2020:786 (X)).
Principle of Legal Certainty
5.7.
The appellant also argues in the appeal that there is a conflict with the principle of legal certainty. The appellant contends that the Supreme Court, in the judgments of 19 December 2014 (ECLI:NL:HR:2014:3613, BNB 2015/67) and 15 June 2015 (ECLI:NL:HR:2015:1671, BNB 2015/158), stated that similar products to magic truffles are edible and should therefore be considered food items subject to the reduced tax rate. However, the Supreme Court only provided a new interpretation of the concept of food items intended for human consumption for the first time on 18 December 2020. This interpretation was subsequently codified in the State Secretary of Finance’s decision of 31 March 2022, no. 2022-6334, Stcrt. 2022 (Value Added Tax, Explanation Table I), which confirmed that magic truffles are not covered by Table I item a.1 of the Dutch VAT Act (Wet OB).
5.8.
In the opinion of the Court of Appeal, the appellant’s reliance on the principle of legal certainty is unsuccessful. The Court of Appeal explains this as follows:
5.8.1.
The aforementioned judgment of 19 December 2014 concerned the interpretation of the term “seed potatoes for the cultivation of vegetables and fruit” as referred to in item a.3 of Table I. However, the dispute with regard to magic truffles is whether they fall under item a.1 of Table I, so the appellant cannot have derived legal certainty from the judgment. In the judgment referred to, the Supreme Court also ruled that the terms “vegetables” and “fruit” as mentioned in item a.3 of Table I should be understood as “all edible plants and plant parts, fruits intended for human consumption, and also mushrooms (the fruiting bodies of a fungus)”. However, this does not imply that the fungus itself can be considered a food item as intended in item a.1 of Table I.
5.8.2.
In the judgment of 15 June 2015, the Supreme Court ruled that mushrooms are food items as referred to in item a.1 of Table I, noting that it was not disputed that mushrooms are edible. This ruling does not provide the appellant with general certainty that magic truffles are also considered food items under item a.1 of Table I.
5.8.3.
Furthermore, it should be noted that on 19 April 2019 (ECLI:NL:HR:2019:643), the Supreme Court submitted prejudicial questions to the CJEU regarding the interpretation of the term “foodstuffs for human consumption” in Annex III, which is the basis for Table item a.1. Therefore, at the time of filing VAT returns for the periods in question, the appellant was aware that there was uncertainty in the case law regarding the interpretation of the Table item.
5.8.4.
The above-mentioned decision does not indicate that the State Secretary previously held a different view on the classification of magic truffles. The decision does not suggest that magic truffles were previously covered by Table item a.1. The appellant acknowledged this. The appellant’s argument that there has been a substantive change in the decision, consisting of the explicit exclusion of (among others) magic truffles from Table item a.1, cannot be accepted. The
Tax Inspector confirmed that, in his view, magic truffles were always subject to the general rate.
Principle of Legitimate Expectation
5.9.
The argument based on the principle of legitimate expectation is already undermined by the appellant’s statement that it decided to apply the general rate from 13 September 2019, following the publication of an article about magic truffles on the Tax Authority’s website. This implies that the Tax Authority did not create a legally protectable expectation for the appellant that the reduced rate would still apply.
Conclusion
5.10.
The higher appeal is unfounded.
Source: uitspraken.rechtspraak.nl
