Flashback on ECJ Cases – C-596/10 (Commission v France) – No Reduced VAT rate if horses are not intended for use in the preparation of foodstuffs or in agriculture

On March 8, 2012, the ECJ issued its decision in the case C-596/10 (Commission v France).

Context: Failure of a Member State to fulfil obligations — Value added tax — Directive 2006/112/EC — Application of reduced VAT rates to transactions concerning equidae and in particular to horses

Article in the EU VAT Directive

Articles 96 to 99 and 110 of the EU VAT Directive 2006/112/EC.

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 97
The standard rate shall not be lower than 15 %.

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 with the exception of those falling under point (6) of Annex III.
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.

Article 99
1. The reduced rates shall be fixed as a percentage of the taxable amount, which may not be less than 5 %.
2. Each reduced rate shall be so fixed that the amount of VAT resulting from its application is such that the VAT deductible under Articles 167 to 171 and Articles 173 to 177 can normally be deducted in full.

Article 110
Member States which, at 1 January 1991, were granting exemptions with deductibility of the VAT paid at the preceding stage or applying reduced rates lower than the minimum laid down in Article 99 may continue to grant those exemptions or apply those reduced rates.
The exemptions and reduced rates referred to in the first paragraph must be in accordance with Community law and must have been adopted for clearly defined social reasons and for the benefit of the final consumer.

Facts & Questions

The Commission raises two complaints in support of its action relating to the non-compliance with the VAT Directive by the national legislation that, firstly, makes transactions that do not fall within the exceptions set out in Annex III to that directive subject to a reduced rate of 5.5% and, secondly, makes some transactions subject to a reduced rate of 2.1%.

In its first complaint, the applicant points out that, apart from the fact that it applies a reduced rate of VAT of 5.5% to transactions concerning live equidae without differentiating as to their use, the French legislation lays down yet more provisions which are not in accordance with the VAT Directive and, in particular, with paragraphs (1) and (11) of Annex III to that directive.

In its second complaint, the Commission criticises the defendant’s administrative practice of applying a rate of 2.1% to sales to persons not subject to VAT of live animals not intended for use as meat and meat products, and in particular horses for racing, competitions, pleasure and riding.

AG Opinion

None

Decision

By applying reduced rates of value added tax to operations relating to equines and, in particular, horses, when these are not normally intended for use in the preparation of foodstuffs or in agricultural production, the French Republic has failed to fulfill its obligations under Articles 96 to 99 of Council Directive 2006/112 / EC of 28 November 2006 on the common system of value added tax, read in conjunction with the annex III of it.

Summary

Application reduced VAT on equine activities, including horses

A reduced VAT rate is not allowed for processing horses and in particular for horses, if they are not normally intended for use in the preparation of foodstuffs or in agriculture.

Source