On December 7th, during the final meeting of the Economic and Financial Affairs Council of 2021, the EU finance ministers agreed to bring the EU rules on VAT more in line with the current needs of the EU Members States and the EU’s policy objectives.
With the current EU’s common VAT rules being in force for 30 years, the European Commission started an overhaul of the rules in 2016 with a VAT Action Plan. The new agreement reached late last year, is one of the results of the Action Plan and will ensure member states are treated equally and give them more flexibility to apply reduced and zero VAT rates.
The agreement includes some key changes to the current system by updating the list of goods and services to which all Member States can apply reduced VAT rates; removing the possibility by 2030 for Member States to apply reduced rates and exemptions to goods and services deemed detrimental to the environment; making derogations and exemptions for specific goods and services available to all countries.
These changes would allow governments to lower VAT in line with the EU’s policy objectives such as fighting climate change, supporting digitalisation and protecting public health. This could potentially lead to revised VAT tariffs for activities such as the live streaming of sports events, active transport and bicycles, medical gear and equipment, and more.
The European Parliament needs to be consulted on the changes before they can be implemented, which is expected to happen in early 2022.