EU 2016 VAT Action Plan: Towards a modernized VAT Rates policy

As part of 2016 VAT Action Plan of the European Union, the European Commission strives to modernise 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 regards to VAT rates:

• Offering 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).
• 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 %.

Source Credit – European Union

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