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Flashback on ECJ Cases – C-360/11 (Commission v Spain) – Spanish reduced VAT rate for some medical products in violation of EU law

03 February 2022
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6 min read

On January 17, 2013, the ECJ issued its decision in the case C-360/11 (Commission v Spain).

Context: Failure of a Member State to fulfil obligations — Directive 2006/112/EC — Points 3 and 4 of Annex III — Reduced rate of VAT — Supply of goods to which reduced rates can be applied — Pharmaceutical products normally used for health care, prevention of illnesses and as treatment for medical and veterinary purposes — Medical equipment, aids and other appliances normally intended to alleviate or treat disability, for the exclusive personal use of the disabled

Article in the EU VAT Directive

Articles 96 and 98(2) in the EU VAT Directive 2006/112/EC.

Article 96 (Standard 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 98 (Reduced rates)
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.

Facts & Questions

The applicant claims that the Court should:
declare that, by applying a reduced rate of VAT to:
Medicinal substances which may be used habitually or are suited to the production of medicinal products, in accordance with paragraph 1(5) of the first section of Article 91 and paragraph 1(3) of the second section of Article 91 of the Ley española del IVA (Spanish Law on VAT);
Sanitary products, material, equipment and appliances which, viewed objectively, can be used only to prevent, diagnose, treat, alleviate or cure human or animal illnesses or ailments, but which are not ‘normally intended to alleviate or treat disabilities, for the exclusive personal use of the disabled’, in accordance with the second subparagraph of paragraph 1(6) of the first section of Article 91 of the Spanish Law on VAT;
Aids and equipment which may be used essentially or primarily to treat physical disabilities in animals, in accordance with the first subparagraph of paragraph 1(6) of Article 91 of the Spanish Law on VAT;
Aids and equipment essentially and primarily used to treat human disabilities, but which are not intended for the exclusive personal use of ‘the disabled’; the common understanding of this term is to be assumed, that is as being different from and more restrictive than the term ‘the sick’, in accordance with the first subparagraph of paragraph 1(6) of the first section of Article 91 of the Spanish Law on VAT,
the Kingdom of Spain has failed to fulfil its obligations under Article 98 of Council Directive 2006/112/EC 1 of 28 November 2006 on the common system of value added tax, in conjunction with Annex III thereto;
order the Kingdom of Spain to pay the costs.
Pleas in law and main arguments
The Commission considers that the system of reduced rates laid down in paragraph 1(5) and (6) of the first section of Article 91 and paragraph 1(3) of the second section of the Spanish Law on VAT goes beyond what is authorised by the VAT Directive, since it surpasses the possibilities granted to the Member States in categories 3 and 4 of Annex III to that directive. The interpretation of the Spanish authorities is at odds with the wording and general scheme of the directive and is not in line with the case-law, pursuant to which exceptions to the general rules of the common VAT system must be interpreted strictly.

 

AG Opinion

(1) Declare that, by applying a reduced rate of VAT to the following categories of goods, the Kingdom of Spain has failed to fulfil its obligations under Article 98 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax, in conjunction with Annex III thereto:

–        medicinal substances which can be used habitually and suitably in the manufacturing of medicinal products;

–        medical devices, material, equipment and appliances which, viewed objectively, can be used only to prevent, diagnose, treat, alleviate or cure human or animal illnesses or ailments, but which are not ‘normally intended to alleviate or treat disability, for the exclusive personal use of the disabled’;

–        aids and equipment which may be used essentially or primarily to treat physical disabilities in animals;

–        aids and equipment essentially or primarily used to treat human disabilities, but which are not intended for the exclusive personal use of the disabled.

(2)      Order the Kingdom of Spain to pay the costs.

Decision

1.      Declares that, by applying a reduced rate of value added tax to

–        medicinal substances which can be used habitually and suitably in the manufacturing of medicinal products;

–        medical devices, material, equipment and appliances which, viewed objectively, can be used only to prevent, diagnose, treat, alleviate or cure human or animal illnesses or ailments, but which are not normally intended to alleviate or treat disability, for the exclusive personal use of the disabled;

–        aids and equipment which may be used essentially or primarily to treat physical disabilities in animals;

–        and, finally, to aids and equipment essentially or primarily used to treat human disabilities, but which are not intended for the exclusive personal use of the disabled,

the Kingdom of Spain has failed to fulfil its obligations under Article 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 thereto;

2.      Orders the Kingdom of Spain to pay the costs.

Summary

According to the ECJ, Spain wrongly applies a reduced VAT rate to certain medical products.

Spain has a reduced VAT rate for the following products: · medicinal substances, which can usually and appropriately be used to obtain medicines; medical devices, apparatus, equipment or instruments which can objectively only be used to prevent, diagnose, treat, alleviate or cure diseases or conditions in humans or animals, but which are not ‘normally intended for the relief or treatment of disabilities, for for personal use only by the disabled”; aids and equipment which may be used primarily or primarily for the treatment of diseases in animals; aids and equipment which may be primarily or primarily used for the treatment of disabilities in humans , but which are not intended for the personal and exclusive use of the disabled. The European Commission considers that Spain has failed to fulfill its obligations under EU law and has therefore initiated a pre-litigation procedure.

The European Court of Justice (CJEU) has ruled that Spain has wrongly set a reduced VAT rate for a number of medical products. This concerns medicinal substances and certain (medical) aids that are used, among other things, for the treatment of diseases in animals. By adopting the reduced VAT rate for these products, Spain has failed to fulfill its obligations under EU law.

Source:

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