Flashback on ECJ Cases C-499/16 (AZ) – Application of the reduced VAT rate to fresh pastry products and fresh pastries depends only on the ‘ best before date ”or the“ use by date ”of these goods

On November 9, 2017, the ECJ issued its decision in the case C-499/16 (AZ). This case dealt with the question whether the reduced VAT rate of fresh pastry products and fresh pastries depends only on the ‘ best before date ”or the“ use by date ”of these goods.

Context: Reference for a preliminary ruling — Taxation — Value added tax (VAT) — Directive 2006/112/EC — Article 98 — Discretion of the Member States to apply a reduced rate to certain supplies of goods and services — Annexe III, point 1 — Foodstuffs — Pastry goods and cakes — Best-before date or use-by date — Principle of fiscal neutrality

Article in the EU VAT Directive

Article 98 of Council Directive 2006/112/EC

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

AZ is a Polish company which produces pastry goods and cakes including croissants with various fillings and sweet rolls with various coatings with a use-by date exceeding 45 days.
During 2010, AZ’s goods were classified as ‘Rusks and biscuits; preserved pastry goods and cakes’, within the meaning of the national legislation on statistical classification of goods for 2008. However, in 2013, those goods were classified by the Director of the Warsaw Customs Chamber (Poland) under subheading 1905 90 60 of the combined nomenclature in Annex 1 to Council Regulation (EEC) No 2658/87 of 23 July 1987 on the tariff and statistical nomenclature and on the Common Customs Tariff (OJ 1987 L 256, p. 1), as amended by Commission Regulation (EU) No 927/2012 of 9 October 2012 (OJ 2012 L 304, p. 1) (‘the CN’), which corresponds to another classification under the national legislation, namely that of ‘Pastry goods and cakes, fresh’.
On 14 November 2013, AZ asked the Minister for Finance for a tax ruling in order to determine whether it was entitled to apply the reduced VAT rate of 8% to deliveries of the goods concerned which, although coming under the CN code corresponding to the classification ‘Pastry goods and cakes, fresh’, have a use-by or best-before date exceeding 45 days. In its application, that company submits that Heading 32 of Annex 3 to the VAT Law inserts, contrary to EU law, a criterion for applying the reduced VAT rate which does not follow from either the VAT Directive or the CN. CN Subheading 1905 90 60 contains no distinction concerning the freshness of the goods, their best-before date or their use-by date.
In rulings on 3 December 2013 and 14 January 2014, the Minister for Finance did not uphold the view taken by AZ and held that the Polish legislature could legitimately adopt a criterion for applying the reduced VAT rate at issue.
AZ brought an action against those tax rulings before the Wojewódzki Sąd Administracyjny w Warszawie (Regional Administrative Court, Warsaw, Poland). That court dismissed that action, stating that additives in the composition of pastry goods and cakes, such as preservatives which extend shelf life, have an influence on the decision of the average consumer.

Questions

Does the fact of making the rate of taxation for pastry goods and cakes depend solely on the criterion of the ‘use-by date’ and the ‘best-before date’, as in the case of those goods in Article 41(2) of the Ustawa o podatku od towarów i usług (Law on tax on goods and services) of 11 March [2004] (Dziennik Ustaw of 2011, No 177, item 1054, as amended), in conjunction with Heading 32 of Annex 3 to that law, infringe the principle of VAT neutrality and the prohibition of unequal treatment of goods within the meaning of Article 98(1) and (2) of Council of 28 November 2006 on the common system of value added tax? ¹

AG Opinion

None

Decision

Article 98 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax must be interpreted as meaning that it does not preclude — provided that the principle of fiscal neutrality is complied with, which is for the referring court to ascertain — national legislation, such as that at issue in the main proceedings, which makes the application of the reduced VAT rate to fresh pastry goods and cakes depend solely on the criterion of their ‘best-before date’ or their ‘use-by date’.

Summary

Confectionery and pastries – Best before or use-by date – Principle of fiscal neutrality

AZ is a Polish company that manufactures pastry and pastries, in particular filled croissants and filled rolls with various garnishes, with a minimum best before date of more than 45 days. These products are classified under ‘Rusks and biscuits, pastry and pastries with a long shelf life’. The reduced rate did not apply to this. This only applied to products with a shorter shelf life (“fresh products”).

The Polish court dismissed AZ’s appeal, emphasizing that the additives used in the composition of the pastry and pastry products, such as preservatives, which extend the shelf life, played a role in the decision of the average consumer. Because the use-by date is an essential aspect of consumer protection, products with different use-by dates can legitimately be considered as non-similar. AZ had not demonstrated that other specific products exist on the market that could be considered similar. Admittedly, the same court recognized that the 45-day shelf life criterion was subjective, but it held in its judgment that the VAT Directive did not preclude the application of that criterion,

AZ has lodged an appeal against that judgment with the highest Polish administrative court. He has requested a preliminary ruling from the CJEU.

According to the CJEU, Article 98 of the VAT Directive does not preclude (provided the principle of fiscal neutrality is respected) a national legislation, according to which the application of the reduced VAT rate to fresh pastry products and fresh pastries depends only on the ‘ best before date ”or the“ use by date ”of these goods.

Source