Issue:
Jugos del Valle discussed with the State on whether fruit and nectarine fruit drinks was considered food for VAT purposes. The VAT tax rate for the sale of food was 0% and the company argued that their juices should be considered food because of its high pulp content.
Summary:
The value-added tax (VAT) tax rate at the moment of the decision was of 0% for those products considered as food. Jugos del Valle, which produces and sells -among other products- fruit and nectarine fruit drinks, filed a petition to consider the ratification of the company’s criteria: that the sales of fruit and nectarine fruit drinks is also subject to the 0% VAT tax rate as they are semi-solid foods containing a high percentage of pulp.
The tax authority did not answer and Jugos del Valle filed a case in Tax Court. The Court denied the criteria and the company filed the case to the Supreme Court.
The Supreme Court established that the VAT system is vitiated by inequity with respect to the sale of solid or semi-solid foodstuffs with respect to the sale of liquid foodstuffs, revoking the appealed judgment and granting constitutional protection to Jugos del Valle.