ECONOMY

EU requires Spain to increase VAT rates for some healthcare products

Finance Ministry says it is studying binding ruling by European Court of Justice

Spain will have to raise the value-added tax rate applied to some healthcare products and services after the European Court of Justice on Thursday ruled in favor of the European Commission, which had argued the government had incorrectly implemented EU rules on VAT.

Currently, all healthcare services and products in Spain are either exempt from VAT or are subject to the reduced rate of 10 percent. The standard rate is 21 percent.

“Spain applies a reduced rate to a broader range of goods than provided for” under VAT rules, the Court said in a statement posted on its website. The ruling is binding

In response, the Finance Ministry said it would not raise VAT on the affected healthcare products until it had fully studied the Court’s ruling. “Although the sentence is binding, it is not immediate,” a ministry source said.

The ministry said it would have to change laws that govern the application of VAT, a process that would take months, adding that it understands that the ruling does not affect medicines and healthcare products used by people with some form of disability.

EU law allows reduced rates to be applied to pharmaceutical products of the type normally used for healthcare, the prevention of diseases and for medical or veterinary treatment, along with medical equipment and apparatuses normally used to alleviate disabilities.

The Commission opened legal proceedings against Spain in 2010 for applying the reduced rate to too broad a range of healthcare goods and services.

The Court ruled that reduced rates should only be applied to finished products that can be directly used by consumers rather than products used as an input to other finished products. It also said reduced rates cannot be applied to appliances used to alleviate the physical deficiencies of animals.

The government had argued that the EU rules failed to sufficiently define the categories of goods and services to which reduced rates can be applied.

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