Subway's sandwiches are too sugary to be classed as bread in Ireland, its Supreme Court has ruled.
Judges found products such as the Meatball Marinara had a sugar content that was 10% of the weight of the flour used in the dough.
This meant the Subway sandwiches did not meet the statutory definition of bread under the Value-Added Tax Act 1972.
The decision means the fast food chain's franchisees can't claim back VAT on the heated takeaway snacks.
Ireland's legal definition of bread says the weight of ingredients such as sugar, fat and bread improver shall not exceed 2% of the weight of flour in the dough.
The panel of five judges thus ruled that they legally cannot be deemed a "staple food" and attract a zero VAT rate.
Mr Justice Donal O'Donnell said the clear intention of the detailed definition of "bread" in the act was to distinguish between bread as a "staple" food, which should be 0% rated, and certain other baked goods made from dough.
And as the Subway heated sandwiches did not contain "bread" as defined, they could not be said to be "food" for the purpose of the Second Schedule of the Act, he held.
The ruling had rejected arguments by a Subway franchisee that it was not liable for VAT on some of its takeaway products, including teas, coffees and heated filled sandwiches.
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The appeal was made by Bookfinders Ltd, based in Tuam, Co Galway, after a 2006 decision by the Revenue Commissioners to refuse it a refund for VAT payments made between early 2004 and late 2005.
Bookfinders claimed a refund on grounds saying it should have paid a zero VAT rate instead of a composite rate of 9.2%.
Its appeal to the Supreme Court included considerations of whether the bread sold in Subway sandwiches fell outside the statutory definition of bread intended under the Value-Added Tax Act 1972 to attract a zero VAT rate.
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