December 20, 2021


The Council reached agreement on Tuesday on a proposal for a directive aimed at updating the EU rules on VAT rates. The new rules reflect the current needs of the Member States and the current political objectives of the EU, which have changed considerably since the adoption of the old rules.

The Council updated and modernized the list of goods and services for which reduced VAT rates are allowed (Annex III, Directive (EU) No. 2006/112), taking into account the digital transformation of the economy, the benefit of the final consumer and the general interest. The updates guarantee Member States equal treatment and offer greater flexibility to apply reduced rates down to zero, to a limited number of products, however (the requirements of the Treasury are always prevalent…) and, conversely, to tax goods harmful to the environment. Equal treatment of Member States is ensured by the opening to all of the existing derogations allowing preferential rates to be applied for certain products, provided that they are compatible with Union principles, while a provision has been adopted to allow for a rapid response to exceptional circumstances, such as pandemics, humanitarian crises or natural disasters. The Council agreed to phase out, by 1 January 2030, reductions and exemptions on fossil fuels and other goods with a similar impact on greenhouse gas emissions, while for chemical fertilizers and pesticides the cut-off date is on 1 January 2032

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