Ireland’s Supreme Court has ruled that Subway sandwiches do not meet the legal definition of bread, and therefore are not liable for tax exemptions.
The court’s ruling on Tuesday ends a 14-year battle by the US takeaway chain to have its sandwiches recognised as a tax-free staple, after a five-judge court determined Subway’s rolls to be “too sugary” to meet the statutory definition of bread.
Ireland’s VAT Act 1972 states that the weight of ingredients in bread such as sugar, fat and bread improver, should not exceed two per cent of the weight of flour in the dough.
Under Irish law bread is considered a staple food, and therefore taxed at zero per cent, while other baked goods from dough are considered non-essential and are subject to VAT.
Subway’s bread sugar content for both its white and wholegrain comes in at five times the qualifying limit under the act, with the Supreme Court ruling that it must therefore be taxed at a rate of 13.5 per cent.
It comes after an appeal brought before the court by a Subway franchisee Bookfinders Ltd, which claimed it was owed a rebate after being slapped with a 9.2 per cent tax on sandwiches.
The Supreme Court’s ruling follows two failed appeals brought by Bookfinders at the High Court and the Court of Appeal.
Justice O’Donnell dismissed the appeal in his judgment on Tuesday, while also admitting the Bookfinders arguments were “ingenious”.
“The argument depends on the acceptance of the prior contention that the Subway heated sandwich contains ‘bread’ as defined, and therefore can be said to be food for the purposes of the Second Schedule rather than confectionery. Since that argument has been rejected, this subsidiary argument must fail,” O’Donnell ruled.