The European Council reached an agreement on a proposal to update EU rules on rates of value-added tax, VAT. The new rules would reflect member states’ current needs and the EU’s present policy objectives, which have changed considerably since the old rules were put in place.
The updates would ensure member states are treated equally and give them more flexibility to apply reduced and zero VAT rates. The rules will also phase out preferential treatments for environmentally harmful goods. Removing the possibility by 2030 for Member States to apply reduced rates and exemptions to goods and services deemed detrimental to the environment.
The Council updated and modernized the list of goods and services for which reduced VAT rates are allowed taking into account the digital transformation of the economy. Making derogations and exemptions for specific goods and services, currently in place for historical reasons in certain Member States available to all countries to ensure equal treatment and avoid distortions of competition.
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 Member States, the legislation will come into force 20 days after its publication in the Official Journal of the European Union, allowing Member States to apply the new system as of that date.
The European Council reached an agreement on a proposal to update EU rules on rates of value-added tax, VAT.
