By Daisy Ayliffe - 16th December 2005
Spain faces legal action if it does not lift VAT exemptions on items purchased by the Catholic Church, the European Commission warned on Friday.
Goods produced for the Catholic Church in Spain are currently not subject to VAT - but in a letter to Madrid, Brussels has warned that the tax exceptions contravene EU law.
“If Spain wants to give financial concessions to the church then they will have to do it in another way,” a commission spokeswoman told EUpolitix.com on Friday.
“They cannot provide concessions by cutting VAT. They must act within EU law.”
It is unclear precisely what religious goods are covered by the exemption on “moveable or non-moveable goods made for the Spanish Church.”
Church furniture such as altars and fonts are presently not subject to VAT - but it is not certain if holy jewelry and other trappings are also covered by the Spanish loophole.
“Any exemption is not authorised under the European Community VAT system set out in the Sixth VAT Directive (77/388/EEC),” a letter to the Spanish government explains.
The authorities in Madrid have two months to respond to the EU Executive’s “reasoned opinion.” If they fail to respond the matter may be referred to the courts.
“VAT is a tax that has been harmonised at EU level so as to ensure that goods and services can move freely without hindrance with the Internal Market. The tax is intended to be a neutral tax on consumption that should apply irrespective of the recipient of those goods,” the commission said in a statement.
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