The Supreme Court has handed down a ruling which allows many types of so-called “special” bread to benefit from a VAT reduced to 4%, like that applied to normal bread. The judges understand that bread is a “basic good” and that there is no variation “that the tax law wanted to treat in a different and worse way”. According to current regulations, “special” bread, which according to the Supreme Court, must have a VAT of 4%, includes bread made from cereal flour, multicereals, toast, biscuits, breadsticks, sandwich bread, breadcrumbs and other variations. .
The judges accepted the appeal of a food company from a Belgian group which had taken legal action to demand that the 10% VAT applied to these variants of bread not be the 4%, its reduced version, applied to the bread in question like normal. He understood that this went against the principle of neutrality of this value added tax, contradicted free competition and was opposed to the European doctrine on the neutrality of this tax.
The latest regulation in force on the types of bread is the Royal Decree approved in April 2019, which distinguishes between common bread and special bread. Common bread includes hard crumb, soft crumb, whole wheat bread or bread made from grain flours. Specialty breads, according to this standard, are those that contain treated flour. The decree, which explains that it is not limited to these examples, explains what a special bread is: that which contains edible seeds, multigrain, Vienna bread, toast, biscuit, breadsticks and regañás, mold bread, breadcrumbs and others like fruit bread.
The latest measures taken by the executive to deal with the economic consequences of the war in Ukraine, in force until the end of September, include the abolition of VAT on ordinary bread. But the general regulations that regulate VAT establish that common bread and its frozen dough benefit from a reduced VAT of 4% in normal situations. The rest of the bread, considered “special” by regulations, remains at 10%.
The Contentious-Administrative Chamber of the Supreme Court considers that these different types of bread should also benefit from the reduced VAT of 4%. The VAT law, they explain, does not make a difference between these two types of bread, but the regulations specific to this food product make a difference. “The law itself does not define common bread, it is not opposed to or distinguished from so-called special bread, nor does it establish the characteristics allowing one to be distinguished from the other, the latter having an unfavorable tax regime.”
The judges compare this case to that of cheese. “It would not be admissible for all cheeses, without exception, to obtain in the law the same tax rate which is refused to certain categories of what, obviously, is a type of bread.” says the sentence. Normal bread and special bread “look similar and are perceived as such,” say the magistrates. This trial began following a lawsuit filed by a food company which demanded that the specialty bread it makes also benefit from this super reduced rate of 4%.
