The EU opens reduced VAT to health, digital and organic products – Central Valley Business Journal

12/07/2021 at 3:40 PM CET
Silvia Martinez
“Where there is a will, there is a way and this is the European way & rdquor ;, the Commissioner for Economic Affairs, Paolo Gentiloni, has celebrated with satisfaction after the approval of the reform on tax rates Value Added Tax (VAT) proposed almost four years ago by Brussels. The new rules will give more flexibility for Member States to set reduced rates of VAT that they consider and even to apply a zero VAT to certain items. “This file has been debated in the Council for a long time, and I am glad that we have found a way to conclude it & rdquor ;, the Slovenian Minister of Finance and President of the Council of Ministers of Economy and Finance (Ecofin) joined, Andrej Šircelj.
First, the agreement will allow the Twenty-seven update the list of goods and services to which Member States can apply reduced rates VAT. The new list will be expanded to include those intended to protect public health, as proposed last April by the European Commission to combat the impact of the covid-19 pandemic, such as gloves, masks or personal protective equipment. In addition, all products that are beneficial to the environment are included, such as bicycles, ecological heating systems or solar panels, and those products and services that serve to support the digital transition and that until now could not be subject to a VAT reduction such as Internet access or online broadcasting of cultural or sporting events. If European governments consider that reducing or applying a type 0 serves to satisfy their basic needs in the aforementioned categories, they will be able to apply them.
The pact will also oblige governments to eliminate by 2030 the possibility of applying reduced rates and exemptions to goods and services considered harmful to the environment and the objectives of Fight against him climate change. Furthermore, and in order to avoid distortions of competition and restore equal treatment, all countries will be able to enjoy the exceptions to which only some Member States were entitled “for historical reasons & rdquor ;. In the case of existing exceptions that do not support climate targets, however, they will have to be removed by 2032. “A delicate balance has been struck ensuring equal treatment between Member States without a proliferation of lower rates that would damage fiscal consolidation post-covid & rdquor; era, Gentiloni highlighted during the public debate held by the ministers.
The reform is based on a previous agreement that establishes that VAT is paid in the consumer’s Member State and not in the supplier’s Member State. This, according to the EU, guarantees that a greater diversity of types (as agreed by Ecofin) is less likely to disrupt the functioning of the single market or create distortions of competition. Furthermore, this also prevents the proliferation of reduced rates, which would jeopardize the ability of Member States to collect revenue. For this reason, the new rules specify the minimum level of the reduced rates and the list of goods and services to which they may be applied.
It was in January 2018 when the European Commission put on the table the need to reform a system that is almost 30 years old and that it requires an “urgent modernization & rdquor; to align the situation with the new reality and priorities of the EU. Once the new rules come into force, Member States will need to continue to apply a normal VAT rate of at least 15%. However, European governments will also have the possibility to apply a reduced rate of up to 5% to goods and services from a maximum of 24 categories on the list. And they will also have the right to apply a rate less than 5% or zero to a maximum of 7 products from the list of basic needs and in which they appear from food to medicine or pharmaceutical and health products.
After the unanimous agreement – in taxation, unanimity is required – the next step will be to refer the text to consultations with the European Parliament, which will have to issue its non-binding opinion, no later than March 2022. Once the opinion of the European Parliament, the Member States may formally adopt the rule that will come into force twenty days after its publication in the Official Gazette of the EU, which will allow governments to apply the new system from that date.
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Copyright © 2017 JNews.