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Spain Violated EU Tax Rules on Health-Care Goods, Top Court Says

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Jan. 17 (Bloomberg) -- Spain violated European Union rules by granting a lower value-added tax on too-wide a range of health-care products including some used for disabled animals, the EU’s highest court ruled.

“Spain applies a reduced rate to a broader range of goods than provided for” under VAT rules “in the field of pharmaceutical products and medical equipment,” the EU Court of Justice said in a final ruling today.

The European Commission, the EU’s executive agency, sued Spain in 2011 for violating the law by granting reduced rates of VAT to medical equipment for general use and for equipment used to alleviate animals’ physical disabilities.

The Brussels-based EU regulator said the Spanish system “goes beyond what is authorized” by the bloc’s VAT rules and that “the interpretation of the Spanish authorities is at odds with the wording and general scheme” of the rules. Spain also wrongly allowed a reduced rate for substances used in the production of medicines, the commission said at the time.

Spain won’t raise the sales tax on the products straight away and will study the scope of today’s ruling, a budget ministry spokesman for the country said in a telephone interview.

Spanish Prime Minister Mariano Rajoy last year announced tax increases and spending cuts totaling 65 billion euros ($87 billion) to tackle the euro financial crisis. The government’s fourth austerity package in seven months also raised the sales levy to 21 percent from 18 percent.

The case is: C-360/11, European Commission v. Kingdom of Spain.

To contact the reporter on this story: Stephanie Bodoni in Luxembourg at sbodoni@bloomberg.net

To contact the editor responsible for this story: Anthony Aarons at aaarons@bloomberg.net