For which goods and services is it possible to reduce VAT according to the proposal of the Economic and Financial Affairs Council (ECOFIN).
The update of the VAT rate regulations decided yesterday by ECOFIN yesterday in Brussels enables states to reduce and even eliminate VAT rates on specific goods, which are mainly related to the shift to green energy, health, safety and digitization.
Under the directive, states will now be able to apply two reduced rates, with the lowest at 5%, to goods and services relating to up to 24 of the categories listed in the updated annex to the European VAT directive.
Countries will also be able to apply a much reduced rate, less than 5%, or eliminate VAT completely on goods falling into 7 categories of those that have been made public and meet basic needs. a zero rate, for up to seven categories on the list that meet basic needs.
It is emphasized, however, that all Member States should be treated equally and should therefore be treated equally in the context of reduced rates, which should, however, remain an exception to the standard VAT rate.
Emphasis is placed on solar panels
The new directive states that solar panels should be included among these seven points in line with the Union's Environmental Commitments on Carbon Emission Exemption and the Green Agreement, and to provide Member States with the opportunity to energy sources with reduced VAT rates.
This is proposed in order to support the transition to the use of renewable energy sources and to strengthen the Union 's energy self - sufficiency, in order to allow Member States to improve end - users' access to green energy sources.
For which goods and services is it possible to reduce VAT?
According to Annex 3 of the new ECOFIN directive, VAT has been amended or added and can be reduced in the following categories:
It is noted that in the relevant legislation of the Union remain unchanged the first two categories related to food and beverages (excluding alcoholic products) and water supply.
This reform is extremely important for the Member States, as VAT is a significant and growing source of EU revenue and equates to more than € 1 trillion, or 7% of EU GDP, yesterday's directive said.
It is also said that this change was deemed necessary, as 2022 marks the 30th anniversary of the EU's common VAT rules, agreed by all Member States that were part of the Union in 1992, and which are now obsolete and too restrictive. .
See the original instruction here (link is external)
It is noted that the ECOFIN proposal will be passed in the coming days by the Eurogroup where it will be judged whether the relevant authority will be given to the Member States to make the mentioned conversions.
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