The ECJ has ruled that Spain applies a reduced rate to a broader range of goods than provided for under the VAT Directive in the field of pharmaceutical products and medical equipment - Case C-360/11 Commission v Spain.

The VAT Directive (Annex III) lists the categories of supplies of goods and services to which the Member States may apply a reduced rate of VAT. The list includes pharmaceutical products normally used for health care and certain other medical equipment, aids and appliances. In 2010 the Commission issued a reasoned opinion to Spain on the grounds that Spain was applying the reduced rate to a broader range of categories than provided for under the VAT Directive and requested Spain to comply with the Directive. The Commission then brought a case against Spain to the ECJ on failing to get a satisfactory response on the matter.

The EJC found against Spain's use of the reduced VAT rate on a number of grounds. According to the ECJ, the VAT Directive does not apply to substances used in the production of medicine; the medicinal substance attracting the reduced VAT rate has to be a finished product. The Court has also limited the definition of pharmaceutical products to exclude certain categories of appliance. It was categoric that the reduced rate cannot apply to aids and equipment to treat physical disabilities in animals. Lastly, unless an appliance is exclusively for the benefit of the disabled, it is unlikely that the reduced VAT rate is properly applicable.

A summary of the judgement is available, as is the full text, from http://curia.europa.eu.