Magic truffles, antacids, chewing gum and VAT

Not everything intended to be eaten counts as a foodstuff for VAT purposes. The strict European reading produces sensible outcomes, but it also exposes a weak spot in Dutch policy.

What is a foodstuff?

The supply of foodstuffs is subject to the reduced VAT rate of 9%. Not everything intended for human consumption is a foodstuff. According to the Court of Justice of the EU in the X judgment, the concept covers essential products that:

• are fit for human consumption
• contain nutrients that serve to build, provide energy for and regulate the human organism and that are necessary for its maintenance, functioning and development
• are consumed because of those nutrients

Aphrodisiacs and mind-altering substances

Applying these criteria after a reference in the X case, the Dutch Supreme Court held that aphrodisiacs containing an entirely negligible quantity of nutrients are not foodstuffs for VAT purposes. It recently held in a series of ten cases that so-called magic truffles are not foodstuffs either.

These truffles are taken for their mind-altering effects, not for the nutrients the body needs. Precisely because of those effects they are consumed in such small quantities that the quantity of necessary nutrients is negligible. The reduced rate for foodstuffs exists to make certain products regarded as particularly necessary cheaper, and therefore more accessible, for consumers. Seen in that light the outcome is, in our view, entirely logical.

Antacids

That does not mean that products which are essential for the consumer are therefore foodstuffs. A recent position taken by the VAT knowledge group on antacid tablets illustrates the point. The product, which does not fall under the reduced rate for medicines, contains substances that neutralise stomach acid. For the average consumer it is essential in getting rid of heartburn, but it is taken for that therapeutic reason and not for its nutrients. In our view the knowledge group was therefore right to conclude that antacid tablets are not a foodstuff. Their supply is subject to 21% VAT.

Confectionery, including chewing gum

The strict reading of the concept of foodstuffs does raise follow-up questions. Dutch policy states expressly that confectionery, including chewing gum, is a foodstuff. Yet for this category it is not always obvious that the products are taken for their nutrients. Consider chewing gum or sweets containing xylitol for fresh breath.

These are products the average consumer consumes in small quantities, so that the quantity of nutrients in a single sweet or piece of gum is negligible. Nor does that consumer take them for the nutrients, but for the fresh breath. The purpose of the reduced rate offers no support for applying it to these products either.

In our view this example shows that the way policy delimits the concept of foodstuffs is due for a refresh in line with the directive. It is not coherent to preach the strict European reading in policy while at the same time treating confectionery and chewing gum as foodstuffs without further question, possibly because drawing the line is difficult. That is having it both ways.