EU to relax reduced VAT rates

The European Commission is to propose in the forthcoming days a relaxation of the rules on reduced VAT rates for the 28 EU member states.  VATlive reported initially in October 2015 on this as part of the 2016 EU VAT work plans.

Currently, member states may only have two reduced VAT rates, the lower of which can only be 5% or higher. The types of products which reduced rates can be applied to are strictly limited, and detailed in Annex III of the EU VAT Directive.

The EC proposals will include some of the following alternatives:

• Right for States to apply to change Annex III of the EU VAT Directive products which may benefit from reduced rates
• Ability to change reduced rates on any products of the States’ choosing
• The option for States to have more than two reduced rates, and no 5% floor level

The review arose following the disputes last Spring around and ECJ ruling that e-books should suffer the higher, standard VAT rates in member states because they had been invent after Annex III was agreed upon.