VAT – Poland case refered by the Court of Justice

The European Commission has decided to refer Poland to the Court of Justice because it must ensure that the EU VAT binding rules are applied by all Member States. In fact Poland may be in breach of law regarding the rate applied to the infants clothes and shoes.

It points out that more efficient instruments- such as direct subsidies or personal income tax allowance- can be easily (without the agreement of the 26 other Member States) implemented by Poland to reach its objectives.
Poland applies a reduced VAT rate of 7% to the supply of clothing and clothing accessories for infants and to the supply of children’s shoes.

According to the VAT Directive (Article 98, in connection with Annex III of Directive 2006/112/EC) only a limited list of supplies of goods and services may be subject to reduced rates of VAT. None of the aforementioned items are included in this exhaustive list, and Poland has been granted no derogation in this regard. The conclusion is that by applying a reduced VAT rate in these cases, Poland is in breach of Community Law.

Furthermore, in the state of the current VAT Directive, the Commission points out that other – and probably more efficient - instrument such as specific direct subsidies or personal income tax allowances can be used at national level by Member States in order to support their social policy.

The Commission sent a reasoned opinion to Poland in February 2008 (see IP/08/149). As Poland has not amended its legislation within the time limit laid down, the Commission has decided to refer the matter to the Court of Justice.

The Commission’s reference number is 2006/2510.

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