European Union – EU finance ministers reach agreement on VAT rate reform

Following the European Commission’s 2018 proposal to reform VAT rates an agreement was reached between EU finance ministers regarding the update of VAT rate rules.

Three measures emerge from this agreement:

1° Updating the list of goods and services to which all Member States may apply reduced VAT rates:

In particular, it is planned to integrate:

  • des produits de protection de la santé publique (exemples : équipements de protection individuelles, masques, équipements médicaux, articles considérés comme des aides essentielles pour les personnes handicapées).
  • des produits bénéfiques pour l’environnement (exemples : bicyclettes, système de chauffage écologiques, panneaux solaires installées dans les habitations privées et les bâtiments publics)
  • des produits qui favorisent la transition numérique (exemples : l’accès à l’internet et la retransmission en direct d’événements culturels et sportifs)

2° Making the derogations and exemptions applicable to specific goods and services available to all countries

When they joined the European Union, some countries obtained derogations to apply reduced rates or exemptions to products on the VAT Directive does not normally allow. In order to avoid risks of distortion of competition, derogations granted to Member States on products that are in line with the Green Pact for Europe and pursue the objectives of the European Union will be allowed for the other Member States of the European Union.

3° abolishing, the possibility for Member States to apply reduced rates and exemptions to certain products and services by 2030.

On the other hand, the exemptions and reduced rates granted to Member States on an exceptional basis for products that do not comply with the Green Deal for Europe will be repealed by 2030.

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