The structure of VAT rates applicable in the European Union and the list of products and services eligible for reduced VAT rates are changing. Introduced by the These new features, introduced by the Directive of April 5, 2022, must be integrated by all Member States before the end of 2024 and the beginning of 2030.
Following the European Commission’s VAT Action Plan, Council Directive (EU) 2022/542 of 5 April 2022 provides for a recast of Directives 2006/112/EC and 2020/285 on VAT rates applicable in the European Union.
VAT rates partially harmonized within the European Union
VAT rates in the European Union until 2022
Until now, the Council Directive 2006/112/EC of November 28, 2006 allowed the member states of the European Union to apply:
- a standard rate of over 15%;
- two reduced rates higher than 5% applicable to the goods and services listed in Annex III of the directive.
In practice, through derogations obtained from the European Commission, in some cases Member States already apply VAT rates below 5% in some cases.
For more details on the different types of VAT rates applicable in Europe and their levels in each European country in 2022, see our article “VAT rates in Europe” in 2022.
The new VAT rate structure in the European Union
Council Directive (EU) 2022/542 of 5 April 2022 now provides that the Member States of the European Union may apply:
- A standard rate of over 15%.
- Two reduced rates above 5%: they can only be applied to 24 types of goods and services listed in Annex III of Directive 2006/112/EC.
- A reduced rate of less than 5%: it can only be applied to 7 categories of goods and services listed in Annex III of Directive 2006/112/EC.
- A 0% rate allowing for the deduction of input VAT : it can only be applied to 7 categories of goods and services listed in Annex III of Directive 2006/112/EC.
Member States must incorporate these new features into their legislation by 31 December 2024 at the latest.
The scope of application of reduced VAT rates is changing within the European Union is changing
Annex III of Council Directive 2006/112/EC of 28 November 2006, which lists the supplies of goods and services eligible for reduced rates, has been updated.
What new products will be eligible for reduced or zero VAT rates?
Some additional goods and services will benefit from a reduced VAT rate or an exemption with the right to deduct input VAT, :
- products used for contraception, sanitary products, and absorbent hygiene products ;
- Face masks ;
- the supply of books by electronic means;
- ticketing for electronic broadcasts at shows, theaters, circuses, fairs, amusement parks ;
- receiving radioand television broadcast services and webcasting of the same programs provided by a media service provider;
- delivery and installation of solar panels;
- delivery of bicycles , including electric ones;
- delivery of electricity, district heating and cooling;
- some living plants.
You can consult on the Lex-Europa website the Annex III of the Directive 2006/112/EC of November 28, 2006 (updated in 2022), specifying all the goods and services concerned by the reduced rates.
By January1, 2030, the directive provides for the abolition of reduced rates or exemptions with right of deduction of input VAT for the following products:
- fossil fuels;
- goods that have a similar impact on greenhouse gas emissions as fossil fuels (e.g. peat, firewood).
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