Action brought on 19 November 2009 — Commission v Federal Republic of Germany

(Case C-453/09)

2010/C 24/59

Language of the case: German

Parties

Applicant: Commission of the European Communities (represented by: D. Triantafyllou and B.-R. Killmann, Agents)

Defendant: Federal Republic of Germany

Form of order sought

Pleas in law and main arguments

The present action is directed against the reduced rate of VAT applied by the Federal Republic of Germany to the supply, importation and intra-Community acquisitions of live animals, in particular horses, even if they are not normally intended for use in the preparation of foodstuffs for human and animal consumption. In the Commission’s view, that is not compatible with the requirements of Directive 2006/112/EC (‘Directive on the VAT system’), in particular regarding breeds of horses which are normally used as dressage horses, riding horses, circus horses or racehorses.

The Directive on the VAT system allows the Member States under certain conditions to apply reduced tax rates alongside the standard rate of VAT. For example a Member State may under Article 98(2) of the Directive on the VAT system apply a reduced rate of VAT ‘to supplies … in the categories set out in Annex III’. As the reduced VAT rate must be regarded as an exception to the standard VAT rate, the provision must be interpreted and applied strictly.

The Commission is of the view that live animals — in particular horses — which are not normally intended for use as foodstuffs, do not fall under point 1 of Annex III. Consequently, the reduced VAT rate under Article 98(2) of the Directive on the VAT system cannot be applied to those animals. That is clear both from the scheme of the directive and from the various language versions of point 1 of Annex III of the directive. Nor does a purposive interpretation lead to a different result: this category (point 1) applies to the preferential treatment of all products intended for the production of foodstuffs for human or animal consumption.

The failure to distinguish between breeds of horses in the Combined Nomenclature is irrelevant in the present case, since customs law listings are based on different perspectives than VAT law. The fact that Article 98(3) of the Directive on the VAT system allows the Member States to refer to the Combined Nomenclature does not mean that a Member State may rely on a lack of precision in the Combined Nomenclature in order to justify the incorrect transposition of Community VAT law.

Transactions involving breeds of horses which are normally used as dressage horses, riding horses, circus horses or racehorses may also not be considered as the supply of goods of a kind normally intended for use in agricultural production, eligible for a reduced tax rate under point 11 of Annex III to the Directive on the VAT system. While horses are by nature agricultural animals, that does not mean that those breeds of horses are normally used in agricultural production. In fact, such breeds of horses are usually used for sporting, educational, leisure or entertainment purposes, thus precisely not in agricultural production.