Poland is awaiting the judgment of the Court of Justice of the European Union on the application of a reduced rate of tax on goods and services for medical equipment. According to the European Commission, medical devices should be subject to a basic VAT rate, which is currently in Poland. 23%, whereas in Poland a reduced rate of 8%.
Therefore, on 26 September 2013 The European Commission brought an action before the Court regarding the rate applied by Poland. The application of the reduced rate is, in the Commission's view, too wide, which could result in a distortion of competition within the European Union.
The chances for the Court of Justice to take a position favourable to Poland are not great. In the event of a loss, the next step will probably be to change tax legislation and increase the VAT rate to medical devices to 23%.
The European Commission considers that Directive 2006/112 Council 28 November 2006 on the common system of value added tax to apply a reduced rate of VAT, it is necessary to comply one from the premises. After first the reduced rate refers to products intended to treat or mitigate the effects of disability.
Second, the reduced rate may apply to products used by persons with disabilities for their own use. The Commission considers that a significant part of the medical equipment to which Poland applies a reduced rate does not fall within any of the above categories and therefore the basic VAT rate should be applied.
The Republic of Poland does not share the Commission's view and maintains that the reduced rate is applied correctly by it.
The matter of applying a reduced rate to medical devices has already been the subject of a dispute between the European Commission and the Kingdom of Spain. The European Court of Justice, by judgment of 17 January 2013 supported the Commission’s view that Spain had failed to implement its obligations by applying a lower VAT rate Directive 2006/112 of 28 November 2006 on the common system of value added tax and ordered Spain to pay the costs.
The Commission’s negative judgment concerning Spain does not give optimism about Poland’s settlement of the reduced rate. Potential increase in VAT to the basic rate 23% will cause drastic increases in prices for medical products. This change will affect doctors who are self-employed. The higher cost of medical equipment is also a problem for hospitals, sanatoriums and clinics, also non-public.
It should be anticipated that the European Court of Justice will give a ruling on the rate applicable in 2015. The chances for the Court of Justice to take a position favourable to Poland are not great. In the event of a loss, the next step will probably be to change tax legislation and increase the VAT rate to medical devices to 23%. However, until the legislation is amended, the applicable rate for medical devices is 8%.