European Commission propose new rules to give Member States more flexibility to set VAT Rates

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During January 2018, the European Commission proposed new rules to give Member States more flexibility to set their own VAT rates.

Currently member states are limited on what goods and services they can apply a reduced rate of VAT to, however if agreed these new proposals will allow member states to set reduced rates at 5% or zero on a broader range of goods and services.

If agreed, these new rules will likely be introduced during 2022 and would allow member states to implement:

  • Two separate reduced rates of between 5%, and the standard rate chosen by the Member States
  • One exemption from VAT (or ‘zero rate’); and
  • One super reduced rate set at between 0% and the reduced rates chosen by the Member State.

The press release of the Commission on the proposal can be found here while an informative Q&A sheet can be found here.