As part of 2016 VAT Action Plan of the European Union (see link), the European Commission strives to modernie also the VAT rate system and give more freedom to the Member States.
The European Commission made a proposal on 18 January 2018 for a Council Directive amending Directive 2006/112/EC as regards rates of VAT with the following objectives with ragards to VAT rates:
• Offereing the EU Member States more flexibility in setting VAT rates:
• A maximum of two separate reduced rates of at least 5%
• One extra reduced rate between 5% and 0%; and
• One exemption with right to deduct (meaning a 0% rate).
• From “white list” (goods/services that can be taxed at a lower rate) to “black list” (goods/services that must be taxed at normal rate).
• 16 categories: (1) services of travel agents, (2) services in accordance with margin scheme in Articles 312 to 325, (3) goods in public auctions, (4) precious metals, jewellery and bijouterie, (5) alcoholic beverages, (6) tobacco products, (7) Supply, hire, maintenance and repair of means of transport, (8) fuel oil and gas and lubricating oils, (9) weapons and ammunition, (10) computer, electronic and optical products; supply of watches, (11) electrical equipment, (12) furniture, (13) musical instruments, (14) works of art, (15) financial and insurance services, (16) gambling and betting services
• The entry into force would be linked to the introduction of the definitive VAT regime (2022)
The proposal has been discussed in the European Parliament on Oct 3, 2018. Amongst other comments made, EU Parliament considered that the standard rate shall permanently remain at least 15 % and shall not exceed 25 %.
Jan 18, 2018
Proposal for a Council Directive amending Directive 2006/112/EU as regards VAT rates
Annex to Proposal for a Council Directive amending Directive 2006/112/EU as regards VAT rates
Oct 3, 2018
Amendments proposed by the European Parliament
January 21, 2020
Ecofin meeting – Poland asked to accelerate the work on VAT rates
