Under the current legal framework, food products are subject to a basic tax on goods and services and in some cases reduced rates 5% or 8%. This article will discuss how to implement the Directive 112 on the application of reduced rates of value added tax to the Polish legal order in the context of the review of the current case law.
SOURCE OF RIGHT
In the Polish law on tax on goods and services in Article 41(2)(2a) provision is made for reduced rates of 5% and 8%
Under EU law, more specifically Article 98(1)(2) Directive 2006/112 Council of 28 November 2006 on the common system of value added tax (Official Journal of the European Union L, No.
347 to 11 December 2006, as amended), Member States may apply one or two reduced rates applicable only to the supply of goods and services specified in Annex III The directives.
In position first the said Annex lists foodstuffs intended for human consumption, animals, live animals, seeds, plants and ingredients normally intended for the production of foodstuffs, as well as products normally intended for use as an additive or substitute for foodstuffs.
In the Polish law on tax on goods and services in Article 41(2)(2a) provision is made for reduced rates of 5% and 8%
Detailed list of taxable foods 5% The rate of tax on goods and services is mentioned in Annex 10 to the Goods and Services Tax Act. second a group of products benefiting from a preferential rate is defined in Annex 3 to that law and is taxable at the rate 8%.
Importantly, when grouping individual goods according to Article 5a The legislator referred to the classification issued on the basis of the provisions on public statistics. Annex 3 and Annex 10 to the VAT Act contains certain goods or services, together with their classification number, in accordance with the Polish Classification of Products and Services (hereinafter: PKWiU).
However, according to Article 98(3) Directives 112, when applying the reduced rates provided for in section 1 for each category of goods, Member States may apply the Combined Nomenclature (hereinafter CN) to specify precisely the scope of the category.
This issue is of vital practical importance because, despite some of the links between these classification systems, certain categories of products have been classified differently in PKWiU and in the CN.
For example, the Act provides for the use of a preferential VAT rate for pastry products and fresh cakes, while applying the basic rate for gingerbread, biscuits and waffles. It is not possible to distinguish between pastry products and sweet biscuits, gingerbread and waffles on CN grounds. Food companies are opposed to such a statutory distinction, often on this ground entering into a dispute with the tax.
On the basis of the case law of the Polish courts on the subject, there are diverging positions of courts on the compatibility of Polish legislation with the Directive. 112.
IMPLEMENTATION OF Z NARUSZENIEM DYREKTYWY 112
An example is the judgment of the WSA in Warsaw on 13 March 2014 (reference no. III SA/Wa 2933/13). The company was of the opinion that Poland incorrectly implemented EU legislation. It indicated that PKWiU should not be used, but Union CN.
The WSA indicated that the view should be shared that the reduced tax rate should be applied to all goods covered by the CN code concerned. The national legislature, including the possibility to apply reduced rates to certain products belonging to a given CN grouping, differs their tax position.
Similarly, the Supreme Administrative Court ruled in its rulings with 28 January 2013 (reference no. I FSK 697/12) and 16 May 2013 (reference no. I FSK 827/12). He stated that the dependence of reduced rates on the classification of PKWiU or such criteria as freshness violates EU rules, in particular the principle of neutrality.
In addition, WSA in Warsaw with 9 April 2014 (reference no. III SA/Wa 3053/13) has indicated that the freedom of a Member State concerns only whether the goods and services covered by a specific CN code tax the basic rate or the reduced rate, but not which goods and services covered by a specific code tax the preferential rate and which tax the basic rate.
He also pointed out that, when treating the nomenclature selectively, The legislator automatically violated the principle of neutrality, otherwise taxing goods with characteristics so similar that they were equally classified within the CN.
The principle of neutrality is therefore affected when a Member State taxes different VAT rates on similar, competitive goods or services.
In the case-law of the TEU, the concept of the similarity of goods for the purposes of the principle of neutrality was interpreted. The basic criterion determining the similarity of goods is their nature.
As regards the criterion of similarity of services, which should also be referred to the similarity of goods, the CJEU considered that in order to determine whether two the goods are similar in particular to the average consumer's point of view, avoiding artificial distinctions based on insignificant differences.
Services are therefore similar when they show similar characteristics and meet the same needs of the consumer, depending on the criterion of comparability in use and when existing differences do not significantly affect the consumer’s decision to benefit from the one or second services.
In view of the above, it is appropriate to assess the similarity of products from the consumer's perspective. The characteristics to be taken into account for this assessment are composition, taste, function of goods (foodstuffs) and possibly other characteristics that could affect the consumer's choice of the goods concerned.
IMPLEMENTAL ONE?
The Provincial Administrative Court in Opole ruled differently than in the case of decisions set out above in the judgment of 19 March 2014 (reference no. I SA/Op 821/13). He stated that Polish legislation was in accordance with EU law and that Poland could decide which products would be subject to the basic rate and which would be lower.
WSA in Kraków in a judgment of 23 May 2014 (I SA/Kr 387/14) concluded that the application of the Combined Nomenclature is not compulsory, that countries can benefit from this option but can also use other means of determining goods subject to a reduced tax rate.
At the same time, PKWiU was based, inter alia, on the CN, and the material scope of most groupings covering products is defined by the material scope of the relevant CN headings, i.e. that each PKWiU grouping corresponds to the whole heading, part of the heading or is a aggregate of several CN headings.
A similar opinion is given by many judges, an example of which is the judgment of the Krakow WSA of 30 October 2013 (reference no. I SA/Kr 1352/13). The Court of First Instance held that Member States may decide whether all products in the category concerned will be subject to a reduced rate.
He cited numerous earlier decisions confirming this position, including the NSA ruling from 24 July 2013 (reference no. I FSK 754/13). The NSA concluded that the restriction of the categories of foodstuffs to which the reduced rate applies does not affect Community law.
The NSA also referred to the judgments of the EU Court of Justice, including 6 May 2010 (The signature. C-94/09) on the Commission v France. The Court then held that a Member State may, subject to respect for the principle of tax neutrality, limit the application of tax preferences to certain aspects of the goods or services in question.
In conclusion, this analysis should be stressed that in many cases taxpayers rely on the non-compliance of Polish legislation with the Directive 112 they wished to obtain confirmation of the possibility of applying a reduced rate to their products by referring to the CN classification, but the argument was too general. It seems that in an individual concrete case where authentically similar and competitive food products are subject to different tax treatment, the charge of violating the principle of neutrality is possible to defend before the Polish court.