On November 11, 2016, the Dutch Supreme Court ruled that sunscreen with UVA and UVB filters, as well as toothpaste containing fluoride, are pharmaceuticals for VAT purposes. These products will therefore be subject to the Dutch reduced VAT rate of 6% and not to the general rate of 21%. For the application of the reduced VAT rate pharmaceuticals thus do not necessarily have to be medicines registered as such in the Dutch Act on Medicines (‘Geneesmiddelenwet’). Moreover, this decision by the Dutch Supreme Court has opened ways for charging the 6% VAT rate on other products that serve healthcare purposes.

According to the Dutch Supreme Court, products serving healthcare purposes can already be defined as pharmaceuticals when their therapeutic function is explicitly shown or when they are presented in such a manner that the average consumer assumes that the product has this function. For sunscreen, the presented therapeutic function covers the protection of skin from sunburn by means of the UVA and UVB filters. For toothpaste, this function entails protection from dental caries through the use of constituents like sodium fluoride.

Practice

This case is of importance to your company if sunscreen, toothpaste and/or other products presented as having a therapeutic function are sold; even if these products are not included in the Dutch Act on Medicines. If this is the case, we advise you to thoroughly explore the possibilities of charging the 6% VAT rate on these products. In addition, we note that, under certain conditions, a refund of the foregone overpaid VAT on these products is possible. The application of the 6% VAT rate can result in changes having to be made in your ERP systems. The question also rises if and which consequences this judgment holds for the Dutch Act on Medicines.