Day 4 June 2015 the judgment of the Court of Justice of the European Union on the signature of the C-678/13 on the possibility for Poland to apply a reduced rate of tax on goods and services (hereinafter: VAT) to medical devices. The Court found that Poland had partially infringed Directive 2006/112 Council 28 November 2006 (hereinafter as: VAT Directive), applying a reduced rate of VAT on certain types of medical and auxiliary equipment and products for pharmaceutical use.
Poland argued that national rules on the application of the reduced rate were in line with European Union legislation.
According to Annex III to the VAT Directive, goods to which a reduced rate may be applied shall, inter alia:
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- pharmaceutical products normally used for the protection of health, disease prevention and medical and veterinary purposes, including products used for contraception and personal hygiene;
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medical equipment, ancillary equipment and other equipment normally intended to mitigate effects or to treat disability, intended solely for personal use by persons with disabilities, including repair of such goods, as well as the provision of seats for the carriage of children in cars.
On the other hand, Annex III to the Act of 11 March 2004 the tax on goods and services (hereinafter: VAT Act) lists a number of medical devices to which a reduced rate applies in Poland. In fact, in Poland a lower tax rate applied to many different types of products connected both directly and indirectly with medicine.
Day 26 September 2013 The European Commission brought an action before the Court regarding the VAT rate applied by Poland. According to the European Commission, medical devices should be taxed at a basic VAT rate, while in Poland a reduced rate was applied at 8%.
Poland argued that national rules on the application of the reduced rate were in line with European Union legislation.
As expected by experts Russell Bedford Poland, the Court of Justice did not divide the position presented in the dispute by Poland. On the other hand, However, it should be noted that not all of the European Commission's allegations have been taken into account.
The Court of Justice in its judgment stated that the application of a reduced rate to cysteine, cystine and their derivatives, hygiene and pharmaceutical products, contact lenses and spectacle lenses constitutes a breach of the VAT Directive.
At the same time, however, the Court of Justice considered that it was not justified for the European Commission to conclude that X-ray equipment, medical hoses, medical clothing made of rubber, general medicine tools and equipment and syringes, needles, catheters, ophthalmic instruments and other medical devices cannot be taxed at a rate 8% VAT.
The Court of Justice also maintained the right to apply a reduced rate in respect of disinfectants, certain dental materials, chemical products for pharmacological and surgical use and other medical devices within the meaning of the Medical Devices Act.
Attention should be paid to the fact that most of the European Commission's allegations have been considered unfounded for procedural reasons.