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Brussels, 19 May 2011

Taxation: Commission refers Spain to Court over reduced VAT rate for medical equipment

The European Commission has decided to refer Spain to the EU's Court of Justice concerning its illegal application of a reduced rate of value added tax (VAT) to general medical equipment, appliances to alleviate animals' physical disabilities and substances used in the production of medicines. These goods do not qualify for a reduced VAT according to the rules laid down in the VAT Directive, and the application of a reduced VAT rate may distort competition within the EU.

The VAT Directive (2006/112/EC) allows Member States to apply a reduced VAT rate to medical equipment, aids and other appliances which are "normally intended to alleviate or treat disability", and which are "for the exclusive personal use of the disabled". However, Spain applies a reduced VAT to medical equipment for general use and for equipment used for disabled animals and so goes beyond the scope of what is allowed under the EU rules.

Furthermore, although the VAT Directive allows a reduced rate to be applied to pharmaceutical products "normally used" for health care, prevention of illnesses and as treatment for medical and veterinary purposes, it does not allow a reduced rate for substances used in the production of medicines.

EU legislation on reduced VAT rates must be strictly interpreted and applied in order to avoid competitive distortions within Member States and between Member States. If a product is not specifically listed in Annex III of the VAT Directive, Member States cannot apply a reduced rate to this product (unless they benefit from a particular derogation, which is not the case for Spain).

The Commission sent a reasoned opinion (second step of an infringement proceeding) to Spain on 24 November 2010 (IP/10/1572) requiring the reduced VAT rates in question to be withdrawn. However, as the Spanish authorities have not done so, the Commission has today decided to refer the case to the EU's Court of Justice.

For more information:

For the press releases issued on infringement proceedings in the area of taxation or customs see:

For more information on EU infringement procedures, see MEMO/11/312.

For the most up-to-date general information on the infringement proceedings initiated against Member States, see:

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