Brussels, 31 January 2008
VAT – Commission takes steps against Poland for the application of a reduced rate on supplies of certain children's items and the exemption applied to supplies of buildings
The European Commission has formally requested Poland to amend its legislation with regard both to the reduced VAT rate it applies to the supplies of certain children's items and to the exemption applied to supplies of buildings or parts thereof. The requests take the form of reasoned opinions (second step of the infringement procedure provided for in Article 226 of the EC Treaty). If the relevant national provisions are not amended within two months in order to comply with the respective reasoned opinions, the Commission may decide to refer these matters to the European Court of Justice.
Reduced VAT rate on supplies of certain children's items
Poland applies a reduced VAT rate of 7% to the supply of clothing and clothing accessories for infants and to the supply of children's shoes.
According to the VAT Directive (Article 98, in connection with Annex III of Directive 2006/112/EC) only a limited list of supplies of goods and services may be subject to reduced rates of VAT. None of the aforementioned items are included in this exhaustive list, and Poland has been granted no derogation in this regard.
The conclusion is that by applying a reduced VAT rate in these cases, Poland is in breach of Community Law. Therefore, the Commission has formally requested that Member State to amend its legislation by means of a reasoned opinion.
The Commission understands the political motivation that has led to the Polish legislation in force. However, the Commission recalls that the VAT Directive was adopted by unanimity of the Member States. Such legislation is, therefore, binding for Member States and the Commission.
Furthermore, in the state of the current VAT Directive, the Commission points out that other – and probably more efficient - instruments such as specific direct subsidies can be used at national level by Member States in order to support their social policy.
VAT exemption for supplies of immovable property
According to the VAT Directive (Article 135(1)(j), in connection with Article 12(1)(a) thereof):
(i) supplies of buildings or parts thereof are subject to VAT where they are made by a taxable person and for consideration;
(ii) the aforementioned supplies are however exempt from the tax where the building is supplied after its first occupation.
The Polish VAT Law does not follow the aforementioned scheme. VAT exemption only applies where two conditions are simultaneously met, namely:
The Commission considers that this national legislation is in breach of Community Law. Therefore, it has formally requested Poland to change its legislation by means of a reasoned opinion.
The Commission's reference numbers are 2006/2510 (reduced rate on children's items) and 2006/2542 (exemption for supplies of buildings).
For the latest information on infringement proceedings, go to:
For the press releases issued on infringement procedures in the area of taxation or customs, see:
 The VAT Directive also provides that Member States may allow taxable persons a right of option for taxation as regards buildings supplied after first occupation.