EU: Agreement to allow reduced rates of VAT

The updated rules will now be sent to the European Parliament for its consultation on the final text.

The updated rules will now be sent to the European Parliament for its consultation.

The European Union (EU) finance ministers today agreed to update the current rules governing value added tax (VAT) for goods and services.

The European Commission (EC) in 2018 proposed to reform the VAT rates. Today’s EC release announces an agreement to revise the EU VAT rates by:

  • Updating the list of goods and services to which all EU Member States can apply reduced VAT rates
  • Not allowing EU Member States to apply reduced rates and exemptions to goods and services deemed detrimental to the environment and to the EU's climate change objectives (by 2030)
  • Making available to all countries certain exemptions or derogations (departures) for specific goods and services, as currently in place for “historical reasons” in certain EU Member States (those derogations not justified by public policy objectives unless in support of EU's climate action to end by 2032)

Next steps

The updated rules will now be sent to the European Parliament for its consultation on the final text by March 2022. Once formally adopted by EU Member States, the legislation will become effective 20 days after its publication in the Official Journal of the EU.

Read related guidance in the form of “questions and answers” (Q&As)

 

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