Sometimes you read something that even as a tax specialist you cannot understand. Not because you do not understand the law, case law or other regulations, but because you cannot get your head around the rational behind the regulations. This is what happened to us when we read the letter the Dutch Minister Health, Welfare and Sport sent to the Dutch House of Commons on April 5, 2023. In this letter the Minister answers questions raised by 2 Members of Parliament with respect to the 21% VAT rate that applies in the Netherlands to human germ cells (human sperm and human ova).

Question

Why is the VAT rate that applies to germ cells used for reproductive purposes for humans (21%) higher than the VAT rate that applies to animal germ cells (e.g. horse sperm) (9%)? How do you feel about this?

Answer

The starting point of the European VAT Directive is that the supply of goods and services are taxed at the general rate. The VAT Directive also offers Member States the possibility to apply a reduced rate to certain supplies of goods and services. This is for example possible on the supply of goods that are normally intended for agricultural use.

Table I of the Dutch VAT Act uses of the possibility to apply a reduced rate on supplies of goods normally intended for agricultural use as offered by the VAT Directive. This includes goods (including semen) intended for the reproduction of the animals mentioned in the table entry. However, the VAT Directive does not allow for the reduced rate to be applied on human germ cells supplied for reproductive purposes. Therefore the general VAT rate of 21% applies.

Question

Can you indicate why the VAT rate for human germ cells such as sperm and egg cells does not fall under the exemption as it applies to other human body material such as human organs, human blood and breast milk?

Answer

The VAT Directive provides for a number of exemptions which, as an exception to the main rule, must be interpreted strictly. The VAT Directive only allows the supply of human organs, human blood and breast milk to be exempt from VAT. The supply of human germ cells therefore does not fall within the scope of this provision.

As stated above when we were reading the answers of the Minister we were really wondering what the rational is behind the fact that the VAT Directive provides the possibility to apply a lower VAT rate to germ cells to be used for agricultural purposes, but that the EU does not seem to allow Member States to apply a lower VAT rate, or an exemption, with respect to human germ cells that are used to fulfill a couple’s desire to have children.

The full text of the letter the Dutch Minister sent to the House of Commons can be downloaded here. (The letter is only available in the Dutch language)

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