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Brussels, 27 November 2008

VAT reduced rate for horses: The European Commission refers the Netherlands to Court of Justice and opens second stage infringement proceedings against Austria, France, Germany and Luxembourg

The European Commission has decided to refer the Netherlands to the European Court of Justice for applying a reduced VAT rate to horses, and in particular race horses. At the same time, the Commission formally requested Austria, France, Germany and Luxembourg to amend their legislation with regard to similar measures. If these Member States fail to comply with the reasoned opinion within two months, the Commission may also refer them to the Court.

Annex III of the VAT Directive contains a limited list of supplies of goods and services which 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 (point 1) and agricultural inputs (point 11).

Reduced rates constitute exceptions to the general principle that the standard rate applies, and the legislation must therefore be strictly interpreted. Reduced rates may not be applied to the supply of domestic animals kept as pets (dogs, cats, dwarf-rabbits, guinea pigs, canaries ...) nor to ponies and race horses which are neither intended as foodstuff nor for use as agricultural input.

The Netherlands applies a reduced VAT rate of 6% to the supply of certain live animals and in particular race horses which are not normally intended for the generation or production of foodstuffs and therefore not included in Annex III.

The Commission sent a reasoned opinion to the Netherlands in October 2007 (see IP/07/1545). As the Netherlands has not amended its legislation within the time limit laid down, the Commission has decided to refer the matter to the Court of Justice.

Also in October 2007, the Commission initiated investigations into similar legislation in other Member States.

One of those Member States was Italy. After receiving the letter of formal notice, Italy decided to bring its legislation in line with the Directive as of the 1st of January 2008.

Austria which applies a rate of 10%, Germany of 7%, Luxembourg of 3% and France of 2,1% or 5,5% (depending whether the buyer qualifies as a taxable person or not) do not agree with the Commission's analysis. Therefore the Commission decided send reasoned opinions to these Member States concerning the incorrect application of a reduced VAT rate to the supply of certain live animals, and in particular horses, which are not included in Annex III of the Directive.

The reference numbers for these cases are; the Netherlands (2005/2278), Austria (2007/4167), Germany (2007/4168), France (2007/4169) and Luxembourg (2007/4170).

Press releases on infringement proceedings in the field of taxation and the customs union can be consulted at:

The latest general information on infringement proceedings against Member States can be found at:

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