Resume of the current VAT rates changes in Europe

Europe, Euro

In April the European Union (EU) gave the final acceptance to update the EU Value-added Tax (VAT) Directive and broaden the list of goods and services to which two reduced VAT rates can be applied while allowing for a reduced VAT rate below 5% for the first time.

In 2020 only Austria and Germany cut VAT rates on certain goods and services to reduce the economic impact of the COVID-19 pandemic.

However, it was in the second half of 2021 and in the first half of 2022 when more EU countries started to implement a series of reduced VAT rates for certain goods and services to fight high energy, fuel, gas prices, and high inflation.

Spain was one of the first countries to temporarily cut, in June 2021, the VAT tax rate on energy from 21% to 10% for low-power household consumers. This tax measure was recently extended until June 30, 2022.

Italy temporarily cut the VAT rate on gas to 5% for the last quarter of 2021. Additionally, this past April 22, the VAT on energy was scrapped and this month the VAT rate for all fuels was cut to 5%. The measure will be in place until July 8.

The Netherlands temporarily cut, between April and December 2022, the VAT tax rate on energy from 21% to 9%.

Belgium temporarily cut the VAT tax rate on gas and energy from 21% to 6% between April 1 and September 30, 2022.

Poland passed the consolidated text of the Retail Sales Tax Act that ratified the VAT exemption approved earlier in the year for food products, gas, and fertilizers. Additionally, for a six-month period, the VAT rate for petrol and diesel was cut from 23% to 8%.

Cyprus approved in November 2021 a six-month temporary VAT tax rate cut from 19% to 5% for energy used by vulnerable households and 9% for the remaining households.

The Czech Republic, in breach of the VAT tax directive applicable at that time, exempted gas and energy from the VAT tax during the last two months of 2021.

Croatia also amended its VAT tax. From April 1, the VAT rate for accommodation services, energy, and natural gas was cut to 13% and to 5% for certain food, medical products, books, and publications. Additionally, until March 31, 2023, natural gas is taxed at a reduced 5% VAT rate.

Lithuania, on the other hand, is planning to extend until December 31, 2023, the 9% reduced VAT rate on catering and takeaway food services that began July 1, 2021.

Portugal decided to extend until June 30 a reimbursement mechanism for the VAT revenues resulting from the increase in fuel prices until a VAT tax rate cut from 23% to 13% on petrol and diesel is approved.

the European Union (EU) gave the final acceptance to update the EU Value-added Tax (VAT) Directive