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Are aphrodisiacs ‘food’ for VAT purposes?

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A judgment from the CJEU (Staatssecretaris van Financiën v X (Case C-331/19)) has once again highlighted the differences in VAT payable on food and related products in individual countries around Europe.

The owner of a sex shop in the Netherlands sold sexual simulants and aphrodisiacs in the form of capsules, drops, powders and sprays. These contained ingredients of animal and vegetable origin and were intended to be taken orally. When selling these products, the shop owner applied the reduced VAT rate of 9% applicable to food in the Netherlands. However, the Dutch tax authorities thought the products were not eligible for this relief and gave the shop owner a VAT bill at the full Dutch rate of 21%. 

EU VAT law gives member states discretion to apply reduced rates of VAT to food, including food supplements and substitutes, and the Dutch courts referred questions to the CJEU asking if aphrodisiacs could be included in that definition. 

The CJEU has now ruled that any product intended for human consumption which provides the human body with the nutrients necessary for its maintenance, functioning and development is potentially eligible for a reduced VAT rate, even if the consumption of that product is also intended to produce other effects. 

However, a product without nutrients, or that contains them only in an entirely negligible quantity, and is consumed only to produce non-nutritional effects, cannot benefit from reduced VAT rates for food.

The case will return to the Dutch courts, which must now analyse the ingredients of these aphrodisiacs and decide whether they contain sufficient nutritional content to be classified as ‘food’. If so, the reduced VAT rate will apply. On the other hand, if the Dutch court finds that any nutrients are of negligible quantity, and the product serves only to produce a non-nutritional effect, it will be liable to VAT at 21%. 

It is important to note that the CJEU’s findings are unlikely to change the UK’s current policy, which applies VAT at the standard rate of 20% to sexual stimulant products as well as vitamin tablets and some food supplements. 

When VAT was first introduced in the EU, member states were allowed wide discretion on how to apply VAT to food, so today a variety of different interpretations are in force around Europe. The Netherlands applies a positive VAT rate of 9% to food but chose to include a specific category for food supplements in its national VAT legislation on foodstuffs eligible for that reduced rate. The current dispute therefore concerns whether the Dutch authorities are entitled to exclude the aphrodisiacs from that heading. 

In contrast, the UK adopted a zero-rate for food for human consumption, but it did not include a specific sub-category for food supplements in its VAT legislation. Furthermore, it is not obliged to do so, because this is optional under EU law. 

Such VAT anomalies are common. Last week, the Irish Supreme Court ruled that Subway sandwiches were subject to VAT at 13.5% in Ireland because the quantity of sugar and fat in the ingredients exceeded limits set in Irish VAT law defining zero-rated food products. No such distinction is applied by the UK, so sandwiches are zero-rated when sold as cold takeaway food here, regardless of the type of bread used. 

Once Covid-19 restrictions are lifted, travellers may wish to stock up on vitamin pills while in Amsterdam, but may prefer to skip Dublin and wait until they reach London before ordering a footlong Sub. 

Sarah Halsted, RSM UK (RSM’s Weekly Tax Brief)
Issue: 1504
Categories: In brief