EU CJ on differentiation of VAT rates
Different reduced VAT rates cannot be applied to similar goods on the basis of a mere subjective criterion, according to a judgment of the EU CJ in a Polish case (C-146/22).
– It follows from the reasoning of the Court’s judgment that the EU rules do not prohibit national legislation from providing that foodstuffs consisting of the same main ingredient and satisfying the same need of the average consumer are subject to two different reduced VAT rates, depending on whether they are sold at retail in a shop or are prepared and served hot to the customer on request for immediate consumption. However, it is important – as pointed out by the CJEU – that these foodstuffs do not exhibit analogous characteristics despite having a common main ingredient or that the differences between them, including the supporting services that accompany their supply, materially influence the average consumer’s decision to purchase one or the other of these foodstuffs, explains Cezary Madeka, senior consultant at Thedy & Partners.
Now the national court will have to rule on the tax rate for the product, which was the basis for the EU CJ ruling.
The ruling of the EU CJ is important because tax authorities will not be able to set VAT rates only on the basis of the literal wording of the rate matrices, but will also have to take into account additional factors.