The Supreme Court establishes that sliced ​​bread, biscuits or grated bread must have a reduced VAT of 4%

The Supreme Court has issued a ruling that opens the door for many types of so-called “special bread” to have a reduced VAT of 4% like that applied to normal bread. The judges understand that bread is a “basic good” and there is no variation “that the tax law has 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 with cereal flour, multicereal, toasted bread, biscuits, breadsticks, sliced ​​bread, breadcrumbs. and other variants.

The judges have upheld the appeal of a food company from a Belgian group that went to court demanding that the 10% VAT applied to these variants of bread was not the 4%, its reduced version, applied to bread considered normal. He understood that this was opposed to 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 types of bread is the Royal Decree approved in April 2019, and it differentiates between common bread and special bread. Common bread includes hard crumb, soft crumb, whole wheat bread or bread made with cereal flours. Special breads, according to this standard, are those that include treated flour. The decree, which explains that it is not limited to these examples, explains what a special bread is: the one that has edible seeds, the multigrain, the Vienna bread, the toasted bread, the biscuit, the breadsticks and the regañás, the bread of mold, breadcrumbs and others such as fruit bread.

The executive’s latest measures to deal with the economic consequences of the Ukraine war, effective until the end of September, included eliminating VAT on common bread. But the general regulations that regulate VAT establish that common bread and its frozen dough have 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 understands that these different types of bread must also qualify for the reduced VAT of 4%. The VAT Law, they explain, does not differentiate between these two types of bread, but the specific regulations for this food product do differentiate. “The law itself does not define common bread, it is not opposed to or distinguished from an alleged special bread, nor are the characteristics established that allow one to be singled out from the other, with the latter endowed with 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 the same tax rate in the law that is denied to some categories of what, with all evidence, is a type of bread.” says the sentence. Normal bread and special bread “are similar and perceived as such.”