1 This request for a preliminary ruling concerns the interpretation of Article 2(1)(a) and (c), Article 14(1), Article 24(1) and Article 98 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax (OJ 2006 L 347, p. 1), as amended by Council Directive (EU) 2018/1713 of 6 November 2018 (OJ 2018 L 286, p. 20) (‘the VAT Directive’), read in conjunction with (i) recitals 4 and 7 thereof, (ii) points 1 and 12a of Annex III thereto, (iii) the principles of sincere cooperation, fiscal neutrality, legality and legal certainty, and (iv) Article 6 of Council Implementing Regulation (EU) No 282/2011 of 15 March 2011 laying down implementing measures for Directive 2006/112 (OJ 2011 L 77, p. 1).
2 The request has been made in proceedings between YD and the Dyrektor Krajowej Informacji Skarbowej (Director of National Tax Information, Poland) (‘the tax authority’) concerning the value added tax (VAT) rate applicable to YD’s sales of chocolate dairy beverages in YD’s establishments.
3 Heading 2202 of the Combined Nomenclature set out in Annex I to Council Regulation (EEC) No 2658/87 of 23 July 1987 on the tariff and statistical nomenclature and on the Common Customs Tariff (OJ 1987 L 256, p. 1), as amended by Commission Regulation (EC) No 1549/2006 of 17 October 2006 (OJ 2006 L 301, p. 1) (‘the CN’), covers ‘waters, including mineral waters and aerated waters, containing added sugar or other sweetening matter or flavoured, and other non-alcoholic beverages, not including fruit or vegetable juices of heading 2009’.
4 According to recitals 4 and 7 of that directive: ‘(4) The attainment of the objective of establishing an internal market presupposes the application in Member States of legislation on turnover taxes that does not distort conditions of competition or hinder the free movement of goods and services. It is therefore necessary to achieve such harmonisation of legislation on turnover taxes by means of a system of [VAT], such as will eliminate, as far as possible, factors which may distort conditions of competition, whether at national or Community level. … (7) The common system of VAT should, even if rates and exemptions are not fully harmonised, result in neutrality in competition, such that within the territory of each Member State similar goods and services bear the same tax burden, whatever the length of the production and distribution chain.’
5 Article 2(1)(a) and (c) of the VAT Directive provides: ‘The following transactions shall be subject to VAT: (a) the supply of goods for consideration within the territory of a Member State by a taxable person acting as such; … (c) the supply of services for consideration within the territory of a Member State by a taxable person acting as such’.
6 Article 14(1) of that directive provides: ‘“Supply of goods” shall mean the transfer of the right to dispose of tangible property as owner.’
7 Article 24(1) of that directive provides: ‘“Supply of services” shall mean any transaction which does not constitute a supply of goods.’
8 Article 96 of the VAT Directive provides: ‘Member States shall apply a standard rate of VAT, which shall be fixed by each Member State as a percentage of the taxable amount and which shall be the same for the supply of goods and for the supply of services.’
9 Article 98 of that directive provides: ‘1. Member States may apply either one or two reduced rates. 2. The reduced rates shall apply only to supplies of goods or services in the categories set out in Annex III. The reduced rates shall not apply to electronically supplied services with the exception of those falling under point (6) of Annex III. 3. When applying the reduced rates provided for in paragraph 1 to categories of goods, Member States may use the [CN] to establish the precise coverage of the category concerned.’
10 Annex III to the VAT directive, entitled ‘List of supplies of goods and services to which the reduced rates referred to in Article 98 may be applied’, sets out, in points 1 and 12a thereof: ‘(1) Foodstuffs (including beverages but excluding alcoholic beverages) for human and animal consumption; live animals, seeds, plants and ingredients normally intended for use in the preparation of foodstuffs; products normally used to supplement foodstuffs or as a substitute for foodstuffs; … (12a) restaurant and catering services, it being possible to exclude the supply of (alcoholic and/or non-alcoholic) beverages’.
11 Article 6 of Implementing Regulation No 282/2011 provides: ‘1. Restaurant and catering services mean services consisting of the supply of prepared or unprepared food or beverages or both, for human consumption, accompanied by sufficient support services allowing for the immediate consumption thereof. The provision of food or beverages or both is only one component of the whole in which services shall predominate. Restaurant services are the supply of such services on the premises of the supplier, and catering services are the supply of such services off the premises of the supplier. 2. The supply of prepared or unprepared food or beverages or both, whether or not including transport but without any other support services, shall not be considered restaurant or catering services within the meaning of paragraph 1.’
12 The ustawa o podatku od towarów i usług (Law on the tax on goods and services) of 11 March 2004 (Dz. U. No 54, item 535), in the version applicable to the dispute in the main proceedings (Dz. U. of 2018, item 2174) (‘the Law on VAT’), provides, in Article 41(2) thereof, that, ‘for the goods and services listed in Annex 3 to the law’, with the exception of those covered by Section 56 of the Rozporządzenie Rady Ministrów w sprawie Polskiej Klasyfikacji Wyrobów i Usług (Regulation of the Council of Ministers on the Polish Classification of Goods and Services) of 4 September 2015 (Dz. U. of 2015, item 1676; ‘the PKWiU’), ‘the tax rate shall be 7%, subject to Article 114(1)’. The VAT rate laid down in that provision was increased to 8% pursuant to Article 146aa(1)(1) of that law.
13 Article 41(2a) of the Law on VAT provides that ‘for the goods and services listed in Annex 10 to that law’, with the exception of those covered by Section 56 of the PKWiU, ‘the tax rate shall be 5%’.
14 Under Article 41(12f)(1) of that law: ‘The tax rate referred to in paragraph 2 shall apply to the supply of goods and services classified in accordance with the Polish Classification of Goods and Services in the group of food and beverage serving services (PKWiU 56), with the exception of the sale of: beverages other than those listed in Annex 3 or Annex 10 to the law or in implementing regulations adopted thereunder, including their preparation and serving.’
15 Point 17 of Annex 10 to that law refers to ‘waters, including mineral waters and aerated waters, containing added sugar or other sweetening matter or flavoured, and other non-alcoholic beverages, not including fruit or vegetable juices of heading 2009 of the CN - only the following products: (1) yoghurt, buttermilk, kephir, milk not covered by Chapter 4 of the CN, excluding products containing coffee and its extracts, essences or concentrates, (2) non-alcoholic beverages in which the proportion by weight of fruit, vegetable or fruit and vegetable juice is no less than 20% of the raw material’.
16 Section 56 of the PKWiU, entitled ‘Food and beverage serving services’, covers ‘restaurant services and other mobile catering services’, ‘services for the preparation and delivery of foodstuffs (catering) to external customers and other catering services’ and ‘services for the preparation and serving of beverages’.
17 YD, the applicant in the main proceedings, operates a coffeehouse chain in Wrocław (Poland) which markets a beverage called ‘Classic Hot Chocolate’, in the form of hot chocolate prepared on the basis of milk and a chocolate sauce.
18 YD applied to the tax authority for binding rate information as regards the VAT applicable to that beverage. By an opinion dated 17 June 2020, that authority found that the sale of that beverage to take away and for consumption on the premises had to be regarded as supply of goods accompanied by ancillary services, namely the preparation of the beverage and serving thereof to customers for immediate consumption. It concluded that that sale was covered by Section 56 of the PKWiU, entitled ‘Food and beverage serving services’, so that such supplies of goods are subject to a reduced VAT rate of 8%.
19 YD challenged that opinion by claiming that it was appropriate to apply the reduced VAT rate of 5%, by analogy with the other supplies of goods referred to in Annex 10 to the Law on VAT, which covers, inter alia, beverages on the basis of milk. In that regard, it asserted that, on account of the similarity between those goods and the beverage at issue in the main proceedings, the principle of VAT neutrality had not been observed, competition rules had been infringed and the Law on VAT had not been implemented correctly.
20 The tax authority confirmed its opinion by decision of 11 December 2020. It stated that the foodstuffs classified in Section 56 of the PKWiU, such as the beverage at issue, were not interchangeable with dairy beverages offered for retail sale, taxed at a reduced VAT rate of 5%. It referred to the difference that, in its view, distinguishes a ready-to-drink beverage sold in shops from a hot beverage prepared by an employee, upon order in a coffeehouse, taking into account the individual wishes of the customer in question. The supply of goods is accompanied, in the second case, by ancillary services that have an impact on the customer’s decision whether to purchase the product in question.
21 Following that decision, YD brought an action before the Wojewódzki Sąd Administracyjny we Wrocławiu (Regional Administrative Court, Wrocław, Poland), the referring court, alleging infringement of Article 41(12f)(1) of the Law on VAT, in conjunction with Article 41(2a) of, and point 17, paragraph 1, of Annex 10 to, that law, as well as of Article 98(1) and (2) and recitals 4 and 7 of the VAT Directive. According to YD, it was following an erroneous interpretation of those provisions that the tax authority concluded that the supply of the beverage at issue in the main proceedings had to be taxed at a reduced VAT rate of 8%. YD claimed that that beverage should be taxed similarly to the other goods listed in Annex 10 to the Law on VAT, namely at a reduced VAT rate of 5%, in order to ensure a level playing field between those goods.
22 The referring court is uncertain whether the national legislation and practice at issue are compatible with the VAT Directive, as interpreted in the case-law of the Court of Justice, and with the principles of the common system of VAT.
23 That court states, in essence, that the Polish legislature has made provision for reduced VAT rates to apply to the ‘foodstuffs’ referred to in point 1 of Annex III to the VAT Directive and to the ‘restaurant and catering services’ referred to in point 12a of that annex. Thus, Article 41(2a) of the Law on VAT provides that a reduced VAT rate of 5% is to apply to the goods and services listed in Annex 10 to that law, which refers to heading 2202 of the CN. Nevertheless, those goods and services cannot benefit from that rate if they are covered by Section 56 of the PKWiU.
24 In that context, the referring court is uncertain, in the first place, whether, having regard to the principle of legal certainty, the national legislature may use two different classification sources, the CN and the PKWiU, in order to define the VAT rate applicable to the same category of goods or services.
25 First, it states that the Law on VAT and the PKWiU do not pursue the same objectives.
26 Second, the referring court asserts that it could be considered that the tax authority enjoys too broad a discretion when determining the VAT rate to be applied to goods and services that meet the same need on the part of the average consumer, which, according to it, is not consistent with the principle of VAT neutrality.
27 Third, that court states that the Polish legislature refers to the PKWiU, whereas the PKWiU interprets the concept of ‘taxable activity’ differently from the common system of VAT, in particular as regards the classification of a service consisting of a principal service and several ancillary services.
28 In the second place, the referring court states that it is undisputed that the sale of the beverage at issue is a supply of goods. Nevertheless, it is uncertain whether the tax authority may consider that the ancillary services linked to its preparation and marketing may determine the application to that product of a different VAT rate as compared to goods that are similar but are not accompanied by such services.
29 In those circumstances, the Wojewódzki Sąd Administracyjny we Wrocławiu (Regional Administrative Court, Wrocław) decided to stay the proceedings and to refer the following questions to the Court of Justice for a preliminary ruling: ‘(1) Do [Article] 2(1)(a) and (c), [Article] 14(1), [Article] 24(1), [Article] 98(1) [to] (3) of [the VAT Directive], read in conjunction with Article 6(1) and (2) of [Implementing Regulation No 282/2011,] points 1 and 12a of Annex III to [the VAT] directive, [recitals 4 and 7 of that directive, and] the principle of sincere cooperation, the principle of fiscal neutrality, the principle of fiscal legality and the principle of legal certainty preclude national legislation, such as that applicable in the present case, which provides for a reduced rate of VAT of 5% for [foodstuffs] including beverages containing milk, with reference to [heading 2202 of the CN], from excluding from that rate [foodstuffs], including beverages containing milk, which are classified as food and beverage [serving services] on the basis of [Section 56 of the PKWiU], and applying to such goods (their supply or services) the reduced VAT rate of 8% if the average consumer, when purchasing such goods or services, treats them as meeting the same need? (2) Is an administrative practice which results in the application of two different reduced rates of VAT to goods with the same objective characteristics and properties depending on whether services consisting in the preparation and serving of such goods are involved, thus [differentiating between those goods] on subjective rather than objective grounds, consistent with the principles of fiscal neutrality and legal certainty?’
30 By its questions, which it is appropriate to examine together, the referring court asks, in essence, whether Article 98 of the VAT Directive, read in conjunction with points 1 and 12a of Annex III thereto, Article 6 of Implementing Regulation No 282/2011, and the principle of fiscal neutrality, must be interpreted as precluding national legislation which provides that foodstuffs consisting of the same main ingredient and meeting the same need on the part of the average consumer are subject to two different reduced VAT rates, depending on whether they are sold at retail level in shops or are prepared and served hot to a customer at his or her request, with a view to their immediate consumption.
31 As a preliminary point, it should be recalled that, under Article 96 of the VAT Directive, the same rate of VAT, namely the standard rate set by each Member State, is in principle applicable to supplies of goods and services.
32 By way of derogation from that principle, Article 98 of that directive provides Member States with the possibility of applying reduced rates of VAT. To that end, Annex III to that directive lists exhaustively the categories of supplies of goods and services which may be subject to those reduced rates (judgment of 22 April 2021, Dyrektor Izby Administracji Skarbowej w Katowicach, C‑703/19, EU:C:2021:314, paragraph 36 and the case-law cited).
33 The purpose of the option open to Member States to provide for reduced rates of VAT is to make certain goods and services considered to be particularly necessary less expensive and, consequently, more accessible to the end consumer, who ultimately bears the tax (judgment of 22 April 2021, Dyrektor Izby Administracji Skarbowej w Katowicach, C‑703/19, EU:C:2021:314, paragraph 37 and the case-law cited).
34 In accordance with the Court’s settled case-law, it is for the Member States, subject to compliance with the principle of fiscal neutrality inherent in the common system of VAT, to determine more precisely which of the supplies of goods and services included in the categories of Annex III to the VAT Directive are subject to the reduced rate (judgment of 22 April 2021, Dyrektor Izby Administracji Skarbowej w Katowicach, C‑703/19, EU:C:2021:314, paragraph 38 and the case-law cited).
35 In that regard, it should be noted that, under Article 98(3) of the VAT Directive, Member States may use the CN when applying reduced rates to categories which refer to supplies of goods, in order to establish the precise coverage of the category concerned. However, it should be noted that use of the CN is only one of several ways of establishing the precise coverage of the category concerned (judgment of 22 April 2021, Dyrektor Izby Administracji Skarbowej w Katowicach, C‑703/19, EU:C:2021:314, paragraph 39 and the case-law cited).
36 Accordingly, provided that the transactions to which the reduced rate applies fall within one of the categories in Annex III to the VAT Directive and that the principle of fiscal neutrality is complied with, the national legislature is free, when defining in its domestic law the categories to which it intends to apply that reduced rate, to classify the supplies of goods and services included in the categories in Annex III to the VAT Directive in accordance with the method which it considers to be the most appropriate (judgment of 22 April 2021, Dyrektor Izby Administracji Skarbowej w Katowicach, C‑703/19, EU:C:2021:314, paragraph 40 and the case-law cited).
37 In that context, the Court held that, subject to compliance with the conditions set out in the preceding paragraph, it is open to the national legislature to classify in the same category different taxable transactions included in separate categories of Annex III, without formally distinguishing between supplies of goods and services, and to make them subject to the same reduced VAT rate (judgment of 22 April 2021, Dyrektor Izby Administracji Skarbowej w Katowicach, C‑703/19, EU:C:2021:314, paragraph 41).
38 Likewise, the Court found that the VAT Directive does not preclude supplies of goods or services falling within the same category of Annex III to that directive from being subject to two different reduced rates of VAT (judgment of 22 April 2021, Dyrektor Izby Administracji Skarbowej w Katowicach, C‑703/19, EU:C:2021:314, paragraph 42 and the case-law cited).
39 Nevertheless, it must be recalled that, where they choose to apply one or two reduced rates of VAT to one of the categories of supplies of goods or services listed in Annex III to the VAT Directive or, where appropriate, to limit their application selectively to some of the supplies of goods or services in each of those categories, the Member States must comply with the principle of fiscal neutrality (judgment of 22 April 2021, Dyrektor Izby Administracji Skarbowej w Katowicach, C‑703/19, EU:C:2021:314, paragraph 43 and the case-law cited).
40 In the present case, it is apparent from the statements of the referring court that the legislation and practice at issue in the main proceedings lead to a distinction being drawn between ready-to-drink dairy beverages which are marketed in shops, those being classified among the foodstuffs covered by heading 2202 of the CN, to which a reduced VAT rate of 5% applies, and hot dairy beverages which, like the ‘Classic Hot Chocolate’ marketed by the applicant in the main proceedings, are prepared by an employee of a coffeehouse at the request of a customer, in order to be consumed immediately, those being covered by Section 56 of the PKWiU (‘Food and beverage serving services’) and taxed at a reduced VAT rate of 8%.
41 Different reduced VAT rates therefore apply to the abovementioned dairy beverages, depending on whether they are sold at retail level in shops, as a ready-to-drink beverage, or whether they are prepared and served hot to a customer, as a supply of goods, at that customer’s request and with a view to their immediate consumption. That distinction follows from their classification, as foodstuff covered by the CN and as a component of food and beverage serving services covered by the PKWiU, respectively.
42 It is apparent, in essence, from the case-law referred to in paragraphs 37 to 39 above that supplies of goods or services coming within Annex III to the VAT Directive may be made subject to two different reduced VAT rates, provided that the principle of fiscal neutrality is observed.
43 Consequently, a method of classifying foodstuffs, such as that at issue in the main proceedings, based in particular on whether those foodstuffs are accompanied by ancillary services, with a view to their consumption, is not, in itself, incompatible with EU law.
44 This must all the more be so since, while both points 1 and 12a of Annex III to the VAT Directive can concern identical or similar foodstuffs as, respectively, ‘foodstuffs’ and food that is the subject of ‘restaurant and catering services’, it follows from Article 6 of Implementing Regulation No 282/2011 that, for the purpose of classifying a taxable transaction as ‘restaurant and catering services’, the EU legislature wished to attach decisive importance not to the foodstuffs themselves or to the method of preparation of the food or its delivery, but to the supply of support services accompanying the supply of the prepared food, such services having to be sufficient for the immediate consumption of that food and predominant in relation to the supply thereof (see, to that effect, judgment of 22 April 2021, Dyrektor Izby Administracji Skarbowej w Katowicach, C‑703/19, EU:C:2021:314, paragraph 58).
45 It is, however, for the referring court to ascertain whether the legislation at issue in the main proceedings observes the principle of fiscal neutrality.
46 In that regard, it should be recalled that that principle precludes similar supplies of goods or services which are in competition with each other from being treated differently for VAT purposes (judgment of 22 April 2021, Dyrektor Izby Administracji Skarbowej w Katowicach, C‑703/19, EU:C:2021:314, paragraph 44 and the case-law cited).
47 As regards the assessment of the similarity of the goods or services concerned, which is ultimately a matter for the national court to determine, it is clear from the Court’s case-law that account must be taken primarily of the point of view of an average consumer. Goods or services are similar where they have similar characteristics and meet the same needs from the point of view of consumers, the test being whether their use is comparable, and where the differences between them do not have a significant influence on the decision of the average consumer to use one or other of those goods or services (judgment of 9 November 2017, AZ, C‑499/16, EU:C:2017:846, paragraph 31 and the case-law cited).
48 Therefore, it is for the referring court to examine whether the dairy beverages classified as foodstuffs covered by heading 2202 of the CN and the hot dairy beverages classified as a service covered by Section 56 of the PKWiU (‘Food and beverage serving services’) are interchangeable from the point of view of the average consumer.
49 In those circumstances, first, the referring court will have to take account, as regards the properties of the beverages at issue in the main proceedings, of the fact that they have similarities, in particular that they are prepared from the same main ingredient, namely milk, and that, according to the findings of the tax authority, they have similar liquid consistency and external appearance.
50 Nevertheless, the referring court will also have to ascertain, in that context, whether the beverages at issue in the main proceedings are likely to differ materially in their taste, consistency and smell, in particular since, as the Polish Government stated in its written observations, the consumer could, as regards the hot dairy beverages subject to a reduced VAT rate of 8%, order additional ingredients which are liable to have a considerable impact on those aspects. Furthermore, the referring court will have to take into consideration the fact that the beverages at issue in the main proceedings have different temperatures, which is liable to have a considerable impact on their respective properties, such as their taste and smell.
51 Second, it is apparent from the order for reference and the wording of the first question referred for a preliminary ruling that the referring court established that the two types of dairy beverage at issue in the main proceedings are aimed at satisfying the same consumption need for sugary non-alcoholic beverages.
52 Third, as regards the question of whether the differences between the dairy beverages at issue in the main proceedings are such as to have a decisive influence on the choice of the average consumer to purchase one or the other of those beverages, it should be borne in mind that, in that regard, it is necessary to take account of the differences in the characteristics of the goods or services at issue and their use which are, therefore, inherent to those goods or services and of the differences in the context in which those goods or services are supplied (see, to that effect, judgment of 9 September 2021, Phantasialand, C‑406/20, EU:C:2021:720, paragraph 41 and the case-law cited).
53 In that context, it should be noted that the beverages marketed by YD are intended, on account of being prepared specifically at the request of customers and served hot, for immediate consumption, whereas that is not necessarily the case for dairy beverages marketed in shops, on the composition of which consumers, moreover, have no influence. It appears, subject to verification to be made by the referring court, that that difference is liable to have a decisive influence on the choice of the consumer to purchase one or the other of those beverages, since that choice is not made in the same circumstances or with the same goal, and even less so if consumers can change the composition of the former beverages by ordering additional ingredients.
54 It is in particular having regard to the aspects set out in paragraphs 49 to 52 above that the referring court will have to determine, first, whether the dairy beverages at issue in the main proceedings have similar properties, second, whether they meet the same needs from the point of view of consumers and, third, whether the differences between those dairy beverages have a decisive influence on the choice of the average consumer to purchase one or the other of those beverages. It should be pointed out, in that regard, that it is sufficient in particular for the third criterion to be satisfied for it to be considered that the goods or services concerned are not similar and that them being subject to different reduced VAT rates consequently does not entail a failure to observe the principle of fiscal neutrality (see, to that effect, judgment of 11 September 2014, K, C‑219/13, EU:C:2014:2207, paragraph 31).
55 In the light of the foregoing considerations, the answer to the questions referred for a preliminary ruling is that Article 98 of the VAT Directive, read in conjunction with points 1 and 12a of Annex III thereto, Article 6 of Implementing Regulation No 282/2011, and the principle of fiscal neutrality, must be interpreted as not precluding national legislation which provides that foodstuffs consisting of the same main ingredient and meeting the same need on the part of the average consumer are subject to two different reduced VAT rates, depending on whether they are sold at retail level in shops or are prepared and served hot to a customer at his or her request, with a view to their immediate consumption, provided that those foodstuffs do not have similar properties despite having a main ingredient in common or that the differences between those foodstuffs, including as regards the support services accompanying their supply, have a significant influence on the decision of the average consumer to purchase one or the other of those foodstuffs.
56 Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the referring court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable.