On October 5, CJEU ruled on the Polish case C-146/22 concerning the application of different VAT rates to the same product (milk-based chocolate drink) depending on where it is sold (a retail store vs. a cafe).

The Polish tax administration claimed that sales of the drink in cafes should be taxed at 8% (food and beverage serving services) while sales of the ready-to-drink product in retail stores should be subject to 5% VAT rate. According to the authorities, the chocolate beverage served in cafes and that sold in shops are not equivalent so it is the circumstances of the sale that are crucial for the determination which VAT rate applies. The reason is that supplying such a drink in a cafe is associated with accompanying services (heating the product and serving it to the table, availability of optional extras) which affect the consumer’s decision. Such services are absent when the same product is sold in shops.

CJEU generally confirmed that Polish law may apply different VAT rates to the same goods. But this is on condition that there must be some differences between the goods that are visible to the consumer. While CJEU said that it is for the referring court to determine if such differences exist, it also offered some guidance on what needs to be taken into account in such a determination:

  • whether the beverages as sold at retail level in shops and as prepared and served hot to the customer at their request for immediate consumption have similar properties,
  • whether they satisfy the same needs of the consumer,
  • whether the differences between them are such as to have a decisive influence on the choice of the average consumer to purchase one or the other of those beverages.

The case went back to the Polish court (WSA in Wrocław) for reconsideration. With that said, from the practical point of view it seems that there will be no difficulty with pointing to differences clearly visible to the consumer between consuming a hot drink in a cafe (with extras available) and purchasing it cold in a shop. Based on CJEU’s conclusions, the restaurant industry can already take some guidance on how to find the right VAT rate.

As a reminder, anti-inflation shield legislation remains in force until year-end, reducing the 5% VAT rate applicable to certain foodstuffs to 0%.

If this issue pertains to your business and you are interested in our assistance, please contact us.

This blog post is provided for general information purposes to keep you up-to-date with changes in tax law, tax rulings by authorities, case law of courts and interesting commentaries. Doradztwo Podatkowe WTS&SAJA shall not be held legally liable for any acts or omissions resulting from reliance on such information.