Brussels, 18 October 2007
VAT- Reduced rate on horses: Commission opens second stage of infringement proceedings against the Netherlands and investigates the situation in Austria, the Czech Republic, France, Germany, Ireland, Italy and Luxembourg
The European Commission has formally requested the Netherlands to amend its legislation with regard to the reduced VAT rate it applies to certain live animals, and in particular horses. According to the Commission, the rate to be applied should be the standard rate. The request is in the form of a reasoned opinion which is the second stage of the infringement proceedings provided for in Article 226 of the Treaty. If the Netherlands fails to comply with the reasoned opinion within two months, the Commission may refer the matter to the Court of Justice of the European Communities. At the same time, the Commission has sent requests for information in the form of letters of formal notice to seven other Member States inviting them to submit their observations within two months.
The Netherlands apply a reduced VAT rate of 6% to the supply of certain live animals and, in particular, horses which are not normally intended for the generation or production of foodstuffs.
According to the VAT Directive (Annex III of the Directive 2006/112/EC), only a limited list of supplies of goods and services may be subject to reduced rates of VAT. Included in that list are foodstuffs for human and animal consumption as well as live animals, seeds, plants and ingredients normally intended for use in the preparation of foodstuffs. Supply of horses not normally intended for the generation or production of foodstuffs is not included in this exhaustive list.
The application of one or two reduced rates of VAT is optional for Member States and constitutes an exception to the principle that the standard rate applies. It is settled case-law that provisions which are in the nature of exceptions to a principle must be interpreted strictly. Therefore, the Commission has formally requested the Netherlands to amend its legislation by means of a reasoned opinion.
At the same time, the Commission has initiated investigations as regards the application of a reduced rate of VAT to similar supplies in Austria, the Czech Republic, France, Germany, Ireland, Italy and Luxembourg. To this effect, a letter of formal notice has been addressed to each of those Member States. This constitutes the first stage of an infringement proceeding.
The reference number of the cases are 2005/2278 (the Netherlands), 2007/4167
(Austria), 2007/2272 (the Czech Republic), 2007/4169 (France), 2007/4168
(Germany), 2007/4171 (Ireland), 2007/2271 (Italy) and 2007/4170