Playing Doctor (and the Art of Classification)

Some court rulings are educational. Others are funny. And every now and then, one manages to be both. Perhaps unintentionally, but gloriously so.

I recently came across a customs case concerning the importation of a doctor play set: a small white coat, a toy stethoscope, thermometer, syringe, reflex hammer, and a tiny face mask. Everything a child needs to play doctor.

The question facing the customs authorities and the importer, however, was anything but child’s play: was this a toy (lower duties), or an item of clothing (subject to 12% import duty)?

The seriousness of play

The customs inspector insisted that the main component of the product was the doctor’s coat. This, he said, gave the set its essential character. Without the coat, there was no doctor; the other items were mere accessories.

The importer disagreed: the whole point was the play, and play comes from the instruments. You can be a doctor without the coat, as long as you have something to listen with. Even if it’s a plastic stethoscope pressed to the wall.

The court examined the matter carefully, probably touched the fabric of the coat, listened to the clicky sounds of the toy thermometer, and concluded that the truth lay somewhere in between. The set had no clear essential character. And so, under the tariff rules, it had to be classified under the code that appeared later in the list. Conveniently (for the importer), the one for toys*.

Sometimes, legal reasoning really is that simple: if you can’t decide, pick the one that comes last…

Where the true essence lies

Was this a toy or an item of clothing? A simple enough question, you’d think. Until your mind, quite innocently, wanders to more adult forms of “role play.”

When couples dress up as doctor and nurse, or teacher and student, what defines the experience? The outfit? The instruments? Or perhaps the… interaction?

And who decides what gives the act its essential character?

Which brings us neatly to VAT. Because the same debate often plays out there. Though usually with fewer costumes.

Composite supplies and the joy of make-believe

Imagine a business selling a bundle consisting of several elements: one main supply and one or more ancillary ones. A hotel stay with breakfast, a telecom contract with a “free” phone, or a spa package with lunch. Or Happy Meals, where there’s also a mix of something edible and something playful.

You might say the line between sleep and food, connection and instrument, toys and tools, play and purpose, is sometimes as thin as a latex glove.

The core question is always the same: what is the essential character of the overall supply?

Is breakfast merely incidental to the accommodation, or a separate supply? And who decides that: the supplier, or the customer?

From doctor’s coat to VAT treatment

The Court of Justice of the European Union (ECJ) has addressed this many times. It’s not only the objective characteristics of the product or service that matter, but also the value that the recipient attributes to each element.

What the supplier considers a mere extra might be the very reason the customer buys it. Some examples:

  • In Levob Verzekeringen (C-41/04), the issue was whether tailor-made software was a single supply or a combination of goods and services. The Court focused on the result the customer wanted to achieve, rather than the technical components that made it up.

  • In Card Protection Plan (C-349/96), the Court ruled that a single package containing multiple features could still amount to one principal supply. In that case, the protection service offered to customers.

  • And in Field Fisher Waterhouse (C-392/11), the Court emphasised that identifying the principal and ancillary elements of a transaction must reflect the economic reality perceived by the average consumer, not just how the supplier structures or describes it. The judgment confirmed that what truly matters is the purpose from the customer’s point of view: the reason they enter into the transaction at all.

Back to our little doctor: the child (or rather, the parent) who buys the set doesn’t see a coat and a stethoscope as separate items, but as a single experience, i.e. the act of playing doctor. And that, from a VAT perspective, is what truly counts.

In customs law, the focus remains on the tangible: fabric, plastic, shape, and value. But in VAT, the analysis is more subjective, and perhaps more human. It’s about the purpose, the use, and the perception of the buyer.

So if we were to assess this “doctor play set” under VAT rules instead of customs law, the set would likely be seen as a single composite supply, driven by one essential aim: the pleasure of make-believe.

Whether it’s the coat or the stethoscope that makes the heart beat faster doesn’t matter much: it’s all part of the same taxable fantasy (yes, it says ’taxable’).

A proper diagnosis

So what do we learn from all this? That the line between clothing and toys can be very thin. And that the essential character of a product or service isn’t always found in the material, but in the experience it delivers.

That applies not just to children playing doctor, but also to VAT inspectors, businesses, and advisers trying to understand what a transaction really is.

The court ultimately ruled that the set should be classified as a toy. Import duties dropped from 12% to 4.7%. A healthy outcome. And perhaps a symbolic one too: play is cheaper than work.

Customs vs. VAT: two worlds apart

This case nicely illustrates the subtle yet fundamental difference between customs law and VAT law.

  • Customs law is mainly about what a product is: its objective characteristics, materials, and composition.

  • VAT law is more about what a product does: its function, its purpose, and the economic reality behind it.

The physical form matters less than the value the customer perceives. A customs officer looks at what he can hold in his hands. A VAT inspector tries to understand what someone does with it.

And so we return to our little doctor: to customs, it’s plastic and textile. To the child, it’s an adventure. To VAT, it’s a composite supply of imagination.

Or, to put it in medical terms: the patient (pardon, the product) has been examined, the diagnosis confirmed, and the treatment complete.

Prescription: play a little now and then. It keeps your VAT mind healthy. And, as we’ve learned, a dirty mind is simply… economically realistic.

*The set was classified under CN Code 9503 00 70, resulting in 4.7% import duties. The case can be found HERE (in Dutch).