Ireland's highest court has ruled Subway's sandwiches do not contain bread, branding it a confectionery product due to its high sugar content.
It said the bread had to be reclassified because it contained five times the amount of sugar a "staple product" was legally allowed to.
Subway's sandwiches are instead a "confectionery item" closer to a cake, according to the Irish Supreme Court.
Subway has dismissed the claims.
"Subway's bread is, of course, bread," a Subway spokesperson said in a statement.
"We have been baking fresh bread in our restaurants for more than three decades, and our guests return each day for sandwiches made on bread that smells as good as it tastes."
Under Ireland’s Value-Added Tax Act of 1972, a huge distinction is made between a "staple product" and a "confectionery product".
Sugar is allowed to account for 2% of the flour's weight as a "staple product", but that figure in Subway's bread is as a high as 10%.
As a consequence, the chain will have to pay 13% VAT, as opposed to a 0% VAT bracket for "staple products".
The case over VAT exemptions has been running since 2006, when Bookfinders Ltd, a Subway franchisee based near Galway, raised this appeal with Ireland's Supreme Court.