Cast shoes: standard or reduced VAT rate?

The Dutch Tax Administration took the view that cast shoes fall under the 21% rate. The District Court of Noord-Holland held that they count as splints and therefore attract the reduced rate.

A ruling of the District Court of Noord-Holland has been published concerning a dispute between a supplier of cast shoes and the Dutch Tax Administration. The authorities considered that the 21% rate should have been applied to the sales and raised assessments and interest charges on the supplier, which had applied the reduced rate.

The supplier sells various types of cast shoe, all intended for use with a walking cast. The great majority go to medical institutions, a small proportion to home care shops.

The dispute

Dressings and orthopaedic footwear appear in the reduced-rate table of the Dutch VAT Act. The supplier argued primarily that cast shoes are of the same kind as dressings, and specifically as splints. In the alternative it argued that they are similar to orthopaedic footwear.

Applying the standard rate would, in the supplier's view, breach the principle of neutrality, which requires similar goods to be treated alike. Splints and orthopaedic footwear do attract the reduced rate.

The tax authorities argued that cast shoes are not similar to orthopaedic footwear, because they are not suitable or intended for patients with orthopaedic conditions but simply serve the healing of a temporary fracture. Nor are they similar to dressings, because they are used in addition to a plaster cast and are not intended to cover a diseased or injured part of the body. There is therefore, in their view, no breach of neutrality.

The ruling

The court held that cast shoes must be treated as splints or articles equivalent to them. The distinguishing feature of a splint is that it allows parts of limbs to be immobilised. The considerable risk that someone in a walking cast will slip without a cast shoe reinforces that function. The court also held that it is beyond reasonable doubt that the shoes are intended for medical purposes.

The court added that cast shoes are not similar to orthopaedic footwear, which is made to measure and serves as an aid for a long-term or permanent disability.

The conclusion is that the reduced rate applies and that the assessments and interest charges must be annulled.