New VAT rates Directive adopted by EU Finance Ministers
06 April 2022
Dimitrios Karoutis, Manager - Indirect Tax Compliance & Advisory |
EU Finance Ministers (ECOFIN) formally adopted yesterday the new VAT rates Directive which aims at modernising the almost thirty years old previous rules and aligning them with common EU priorities such as fighting climate change, supporting digitalisation and protecting public health. The changes are now published in the Official Journal, meaning they enter into force 6th April 2022.
In a nutshell, this fundamental overhaul of the VAT rates consists in the following measures:
i) Annex II of the VAT Directive, which provides for the supply of goods/services to which reduced VAT rates are available, is updated. The scope of several categories is extended and ten (10) new categories are added. Digital services (e.g. livestreaming of cultural and sports), goods that protect public health (e.g. personal protective equipment, masks) and certain items that promote the EU's climate change priorities (e.g. bicycles, green heating systems) are now included,
ii) Member States (MS) must still apply a normal or standard rate of at least 15% and may apply two reduced rates of at least 5% to items covered by the list in Annex III of the VAT Directive. In addition, every MS may set a super-reduced rate (lower than 5%) and a 0% rate for products to cover basic needs (e.g. foodstuffs, pharmaceutical products) and
iii) The country-specific derogations that are in line with the EU Green Deal can be kept, but an ‘equal treatment' clause makes them available for other MS who wish to use them. MS will have to end any derogations that are not in line with the EU Green Deal by 2030.
In connection with the possibility for MS to set reduced rates for internet access services, the place of supply rules change so that the place of supply for the provision of virtual attendance is where the virtual visitor is located. MS shall implement these new place of supply rules for virtual/streamed activities at the latest by 31 December 2024 (i.e. applicable as from 1 January 2025).
Council Directive (EU) 2022/542