Italy withdraws VAT rise to 25% on COVID-19 worries
- May 15, 2020 | Richard Asquith
Italy has withdrawn a planned increase in its standard VAT from 22% to 25% on 1 January 2021. The increase was a budget measure to cover the risk that Italy would breach Euro currency zone limits on budget deficits.
The move is part of a range of measures announced 14 May 2020 to support the economy during the COVID-19 crisis.
The rise has already been delayed twice. Italy had already rolled over the planned VAT rise from 2020. The plan was for the current standard rate of 22% to rise to 25% in January 2021, and then to 26.5% in January 2022. This was contained within the 2020 Budget Law. There would also have been an increase in the reduced rate of 10% to 12% in January 2021.
The new measures announced this week effectively block this rise.
The increase had originally been scheduled in the 2019 Budget Law for 1 January 2020. It had already been delayed one year in 2018. It was designed to ensure Italy remained within the Euro currency budget deficit rule of 3% of GDP. However, on both previous delays, compromises have been found to avoid the rise.
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