We recently shared news of the European Commission (EC) opening a feedback period concerning an initiative to review VAT rules for financial and insurance services. The feedback period has now ended, and a public consultation period is set for the first quarter of 2021.
The consultation will gather stakeholders’ views on the current VAT treatment of financial and insurance services. When the rules exempting such services were introduced, the rationale was that there were numerous technical hurdles in calculating the taxable base for financial and insurance services. Yet, such exempt status has led to competitive disadvantages and complexities in the law. Present day VAT laws around financial and insurance services have been unable to remain up to date with new industry developments and have increased litigation and led to inconsistent application by EU Member States. Therefore, the EC’s initiative specifically aims to confront the lack of VAT neutrality, the legal uncertainty, and the regulatory complexity through a change in policy.
Source: SOVOS
