EUROPE region recent VAT updates

Albania’s Parliament is reviewing a bill to amend the VAT Act by setting a 0% VAT rate for basic household consumption goods such as bread, dairy, eggs, fruits, vegetables, and meat, with the detailed list and criteria to be finalized within three months.   🔗  

Austria

• Input tax deductions cannot be refused solely because an invoice has formal defects, such as a missing supplier VAT ID or insufficient service description, if the substantive conditions are met and can be evidenced with other documents. Invoice corrections take retroactive effect, so the deduction may be claimed for the original period.   🔗      🔗    
• Deliberately interposing a non-independent leasing company in real estate leasing to obtain input VAT deductions is considered abusive under § 22 BAO. The scheme typically uses a formal sequence (taxable leasing plus a later option for exemption) to secure VAT benefits while avoiding VAT adjustments, which is contrary to the law’s purpose; confirmed by the Supreme Administrative Court decision of 30.01.2026, Ra 2023/13/0002.   🔗    
• Austria’s finance ministry issued guidance following a court decision confirming that VAT exemptions for intra-EU (Austria-to-Germany) supplies can stand when the goods are actually transported, even if order/transport documentation has minor formal defects.   🔗    
• In reverse-charge construction services, if VAT is incorrectly invoiced and the recipient pays it, they generally cannot claim input tax, but they may seek a direct refund from tax authorities where supplier correction/repayment is impossible or unduly difficult (e.g., insolvency) and the VAT was actually remitted to the tax office.   🔗    
• Austria’s Supreme Administrative Court ruled that VAT on mobile roaming services depends on where the service is physically used in Austria, so non‑EU operators supplying roaming to non‑EU customers must handle Austria’s VAT obligations regardless of where the operator is located or what international telecom agreements say.   🔗    
• Austria’s lower house is considering legislation to amend its VAT Act to introduce a new 4.9% reduced VAT rate for certain essential food products from July 1, adjusting existing reduced rates to accommodate it.   🔗    
• Under §§ 9 and 80 BAO, former managing directors can be held jointly liable for unpaid taxes if they breach their due-diligence duties during their term—e.g., by failing to question atypical circumstances that could facilitate tax evasion—and such liability may also extend to later tax losses caused by those breaches (BFG 22.01.2026, RV/5200012/2025).   🔗  

Croatia has proposed a “floating” VAT rate for energy products that would let the government adjust rates during special disruptions without parliamentary approval, aiming to stabilize the market and protect consumers.   🔗     🔗  

From 1 September 2026, Cyprus will replace its time-based real estate VAT rules with a use-based system based on “first occupation” and “first use,” ending the transitional 5% regime (except limited cases) while retaining the 5% rate for primary residences under the new definitions.   🔗  

Czech Republic  – The cap on input VAT deduction for M1 passenger cars in the Czech Republic is expected to be removed at the end of 2026, likely restoring full VAT deduction for even higher-end vehicles, while income tax limits remain unchanged.   🔗  

Denmark

• Denmark’s tax authorities denied a VAT refund because the company couldn’t prove its photographs met the VAT law definition of “works of art,” specifically failing the requirement that photographs be signed and numbered (up to 30 copies) directly on each photograph.   🔗    
• Denmark’s Tax Agency, in a recent Tax Court-related decision, clarified that transfers of undeveloped building plots are subject to VAT, while leaving open issues about how the VAT base is calculated and whether certain related costs are excluded.   🔗      🔗  

Estonia Analyst Triinu Tapver says lowering VAT on food provides only short-term relief, as the sector also faces geopolitical tensions, higher input costs, supply chain problems, and regulatory pressure. With food prices rising faster than wages since 2019 and profitability declining, any recovery in purchasing power and lasting growth won’t arrive until later, likely depending on export competitiveness.   🔗  

European Union

• The European Commission proposed “EU Inc.”, an optional fully digital EU-wide limited liability company form enabling cross-border startups and scaleups to register within 48 hours for under €100 with no minimum capital and streamlined data sharing, alongside an EU-wide employee stock option scheme.   🔗   
• Despite reduced capacity and significant judicial turnover, the General Court delivered a record performance in 2025 by closing the most cases in its history—cutting pending caseloads to an 18-year low and shortening average proceedings—while issuing its first preliminary-ruling judgments and opinions following the October 2024 transfer of that jurisdiction.   🔗    
• On 5 May 2026, EU finance ministers were set to agree new rules that give the EPPO and OLAF access to EU-level VAT data, strengthening cross-border cooperation to better combat VAT fraud.   🔗    
• The EU is reviewing its long-standing VAT exemption for financial services, citing market distortions and lost revenue while weighing options as political groups split between keeping the exemption and imposing stronger, harmonized taxation reforms.   🔗          
• OLAF uncovered a major cross-EU customs and VAT fraud scheme in which undeclared imports misused transit procedures and customs procedure 42, leading to an estimated €118 million loss in duties and €79 million in VAT and prompting criminal investigations and arrests in Poland.   🔗    
• European Union, Russia The EU has adopted its 20th package of sanctions against Russia, intensifying anti-circumvention and energy measures and targeting sectors including financial services and crypto to pressure Russia toward negotiations on terms acceptable to Ukraine.   🔗  

France will end the simplified VAT regime effective January 1, 2027, requiring affected businesses to move to the standard actual VAT reporting (monthly/quarterly instead of semi-annual), with higher compliance burdens and cash-flow impacts.   🔗  

Germany

• Germany’s coalition debated funding labor tax cuts by raising the VAT rate but potentially offsetting revenue gains with base-narrowing measures like a lower reduced rate or zero-rating food, which could substantially reduce or eliminate the financing benefits.   🔗    
• The BFH held that in insolvency, when previously uncollectible receivables are later paid, the VAT must be corrected a second time upon receipt of payment independently of whether the original uncollectibility adjustment was properly made, even if earlier assessments for the pre-insolvency period cannot be amended due to finality.   🔗    
• A German Federal Fiscal Court held that input VAT may be deducted from an advance-payment invoice even if it doesn’t use the word “prepayment,” provided it clearly indicates payment for a future supply, and it sent part of the case back for reevaluation.   🔗    
• The German Federal Fiscal Court ruled on when an individual PV investor may deduct input VAT paid via advance payments, confirming that deduction depends on specific timing and conditions tied to the invoices.   🔗    
• Non-profit sports club membership fees are generally VAT-taxable as consideration for services under EU law, while Germany’s VAT exemption for certain sporting activities is narrower than EU requirements and has led to a BFH remand to determine which specific club services qualify, leaving uncertainty—especially around input tax deduction due to potential non-alignment with EU law.   🔗    
• Input tax deduction for an advance payment invoice does not require the invoice to explicitly label the amount as “prepayment,” as long as it’s clear from the invoice that the service is yet to be performed.   🔗    
• The BFH held that a nonprofit sports club’s free provision of stadium facilities to its outsourced team operations is not a VAT-liable withdrawal, but it can still require an input tax adjustment under German VAT rules due to a change in circumstances when the outsourcing entity is not included in a VAT group.   🔗    
• The BFH held that renting cold storage and funeral ceremony rooms for corpse custody as part of funeral services does not qualify as a VAT-exempt rental under § 4 Nr. 12 Satz 1 Buchst. a UStG, even if the tax office treated only passive cold-room rentals without a funeral contract as exempt.   🔗    
• The BFH held that a transfer company’s fees for workforce reduction and corporate restructuring are taxable for VAT because the services primarily benefit the employer rather than constitute VAT-exempt social welfare or social security services.   🔗    
• Germany’s Ministry of Finance has issued a new VAT registration certificate template (VAT 1 TN) with updated validity, digital issuance rules, and specific limitations for using the certificate for foreign VAT refunds and overseas VAT registration.   🔗    
• In multi-purpose voucher chains without a commission agreement, each intermediary acting in its own name and for its own account is taxed on the difference between the voucher’s value/issue price and its purchase price, as reflected in the amended VAT Application Decree.   🔗  

Greece’s 2026 tax reform proposal would replace variable sanctions with a uniform €100 penalty for late or missing zero-liability VAT returns, with potential reductions if taxes are settled by set deadlines, subject to public consultation.   🔗  

Hungary

• 5% VAT applies to storage units (and certain parking spaces) sold with an apartment only when they are economically and functionally tied to the residential unit (and sometimes count toward usable area), while garages and parking spaces built as separate premises generally remain taxed at 27% with the sale price allocated accordingly.   🔗    
• The European Commission has referred Hungary to the Court of Justice over a discriminatory retail turnover tax regime that it says breaches Single Market rules by unfairly burdening foreign-controlled retailers.   🔗     🔗    
• Hungary’s new Tisza Party government proposes cutting VAT on “healthy foods” and firewood from 27% to 5% and exempting prescription medicines to reduce living-cost pressures, though defining “healthy foods” could trigger disputes and classification issues.   🔗  

Ireland

• Ireland will end the 10-tonne packaging EPR exemption by August 2026, requiring all packaging producers to register and report data (with component-level reporting from 2027), expanding obligations and driving new compliance and data-management needs.   🔗    
• Ireland has confirmed a permanent VAT cut for hospitality services—reducing the rate from 13.5% to 9%—starting in July 2026 for food, catering, and hairdressing.   🔗    
• Ireland’s Revenue has updated VAT guidance to apply the second reduced 9% VAT rate to guest/holiday accommodation and restaurant/catering services from 1 July 2026, reflecting Finance Act 2025 changes.   🔗  

Italy

• The Italian Supreme Court held that an assignment of a VAT (IVA) credit takes effect against the Public Administration upon the Administration’s receipt of notification, irrespective of the assignee’s assignment formalities (Ordinance No. 9656/15 April 2026).   🔗    
• Subjectively non-existent invoices are real transactions where the invoice is issued by a non-genuine intermediary (e.g., a “paper company”), and recent case law sets proof and compliance requirements that affect VAT deduction, cost deductibility, and potential sanctions—distinguishing them from objectively non-existent operations where the transaction never occurred.   🔗
• In EU VAT chain transactions, an intra-Community supply depends on proving who organized the transport, but because member states lack harmonized evidentiary rules (and Italy provides limited guidance under Art. 41-ter of DL 331/1993), operators must carefully document and align contractual, carrier, and invoicing evidence to demonstrate that the intermediate operator organized the transport.   🔗    
• From 2026, individuals renting out three or more short-term tourist apartments will generally be presumed to be carrying on a business and thus face VAT obligations, with the exact VAT rate depending on whether the arrangement is treated as hotel-like accommodation (10% VAT) or as simple apartment rental amid ongoing debate over harmonizing treatment.   🔗    
• For 2026 tax returns, a 21% tax now applies to the rental portion tied to appurtenances in short-term leases, and the prior rule blocking appurtenances has been removed, with appurtenance rent included in the main residence section per updated form instructions.   🔗    
• The Italian Supreme Court ruled that VAT data sent to the Business Register is binding on the Revenue Agency, as the technical transfer rules merely facilitate communication between public bodies and the applicable VAT provision is immediately enforceable.   🔗  

Lithuania published an up-to-date legal commentary on Lithuania’s Value Added Tax (VAT) Law, in effect from May 1, 2004, reflecting the current version as of April 29, 2026.   🔗  

Malta’s new VAT guidelines effective 1 October 2026 narrowly limit VAT exemptions for gambling and will make most gambling and betting supplies, including online sports betting, taxable—requiring operators to update VAT treatment, pricing, and billing systems ahead of the change.   🔗  

Netherlands

• The Supreme Court held that only the individual contracting entity—not the fiscal unity as a whole—can apply VAT deduction under Article 29(1) for unpaid consumer installments, requiring a direct contractual link between the VAT-charged services and the unpaid payments.   🔗   🔗       🔗       🔗       🔗    
• The Zeeland‑West‑Brabant District Court held that X BV was knowingly involved in a VAT fraud scheme trading Makita tools through an intermediary with no genuine business function, so its claimed input VAT deductions were rightly refused.   🔗    🔗
• The Zeeland‑West‑Brabant District Court rejected a claim for Dutch VAT refunds on accommodation of foreign temporary agency staff because the housing primarily served employees’ private interests and the company failed to prove compelling business circumstances removing employees’ freedom of choice (BUA; HR 13 Nov 2020, ECLI:NL:HR:2020:1777).   🔗    🔗
• The District Court of Gelderland held that online typing skills courses are not VAT-exempt as vocational education because they lack a sufficiently direct link to a specific profession or subject, so the standard 21% VAT rate applies.   🔗    
• The District Court of The Hague held that X BV’s rental of squash and padel courts to private athletes is exempt from VAT as an exempt rental of immovable property because it provides exclusive time-bound use with only minimal ancillary services.   🔗     🔗    
• Whether a real estate property is treated as “new” or “existing” (often disputed in redevelopment) determines whether VAT applies with transfer-tax exemptions or whether transfer tax applies and renovation VAT is generally non-deductible, directly affecting deal profitability and litigation risk.   🔗    
• A court held that the taxpayer must pay the VAT shown on self-billed invoices under Article 37 of the VAT Act, while reducing the penalty because gross negligence was not proven to involve intent.   🔗  🔗    
• A court upheld the denial of a religious association’s VAT refund because it failed to prove it carried out taxable business activities, so its right to deduct input VAT—and the related additional assessments and 10% penalty—were properly rejected.   🔗    

Norway – The Tax Directorate held that VAT compensation for rental to a church council is not treated as public sector leasing because the church council is economically and administratively autonomous, even when activities are municipally funded, so voluntary VAT registration does not apply.   🔗  

Poland

• When spouses jointly own a property and each signs a separate rental agreement for half to the same tenant, each spouse is treated as a separate VAT taxpayer with its own 240,000 PLN VAT exemption limit for their individually taxable rental activity.   🔗    
• A case assessed whether a 0% VAT rate can apply to an advance payment for exported goods when the export confirmation is obtained after the tax documentation deadline. DKIS rejected the company’s view that confirmation within six months of the advance is enough, holding that both the export and obtaining the export confirmation documents must meet the statutory timing requirements.   🔗    
• The article explains that for comprehensive warehousing services provided from Poland to a Swiss customer without the customer having any real-estate link (no warehouse space/access/control), the services are not tied to real estate so the place of supply is Switzerland (triggering reverse-charge treatment rather than Polish VAT).   🔗    
• Poland extended the reduced VAT rate for certain fuel products, pushing the end date from April 30 to May 15, 2026, via Regulation No. 573 published April 27, 2026 and effective April 30, 2026.   🔗     🔗    🔗  

The Romanian VAT system—aligned with EU rules—treats individuals and entities (including NGOs and authorities) as taxable persons when they carry out regular or threshold-triggering supplies of goods and services, with VAT liability determined by the place of supply so tax is due in the single relevant EU country.   🔗  

Russia

• Russia has approved a bill to tax cryptocurrency transaction income using FIFO accounting while disallowing loss carryforwards (except under special rules for certain digital financial assets) and exempting some digital-custodian and exchange services from VAT, with the Central Bank overseeing exchanges and purchase limits for citizens.   🔗    
• Russia’s Ministry of Finance proposes gradually raising VAT on cross-border e-commerce goods from 7% in 2027 to 14% in 2028 and 22% in 2029, with VAT collected by foreign or Russian digital platforms and accompanied by new rules and penalties for e-commerce warehouses and operators.   🔗    
• From April 1 to December 31, 2026, certain STS catering businesses with under 60 million rubles in income and at least 70% of revenue from catering receive a temporary VAT exemption (without the regional average wage requirement), alongside clarified procedures for entrepreneurs switching STS regimes.   🔗  

Serbia has expanded its VAT refund reciprocity program to include Bulgaria, Luxembourg, Sweden, and France, allowing eligible taxpayers from these countries to claim VAT refunds in Serbia (and vice versa for Serbian businesses) under the respective agreements.   🔗  

Spain

• In Spain, most SII penalties are driven by operational mistakes like late filings, incorrect or mismatched data, missing invoice records, and “accepted with errors,” and finance teams can reduce risk through structured data validation, clear ownership, and ongoing monitoring to catch issues before AEAT does.   🔗    
• A dissolving company’s payment to another entity to cover assumed future employee severance is treated as a taxable VAT-eligible service (21% VAT, deductible if conditions are met) and may also be deductible for corporate income tax if properly accrued, documented, and accounted for.   🔗  

Switzerland

• A Swiss court held that a foreign entity’s office is only a representative office—not a permanent establishment—for Swiss VAT purposes—so the Swiss bank could not claim input tax on related services (Q1 2017–Q4 2020).   🔗    
• Non–Swiss companies not VAT-registered in Switzerland may claim a Swiss VAT refund for eligible 2025 business expenses (minimum CHF 500) by June 30, 2026 if they meet reciprocity and documentation requirements and appoint a Swiss fiscal representative, noting 2025 changes such as restrictions on foreign travel agencies reclaiming VAT on re-invoiced goods/services.   🔗  

Turkey

• Turkey updated its special consumption tax (SCT) rates for gasoline, diesel, LPG, propane, and butane, effective April 28, 2026.   🔗    
• Title deed fees are governed by the Fees Law and are calculated using the declared transfer/acquisition value, which cannot be below the property tax value. VAT should not be included in the fee calculation base; the title deed fee is charged only on the value excluding VAT. This approach is supported by the Fees Law and related administrative regulations.   🔗  

Ukraine

• VAT becomes chargeable when the supplier begins delivery to the buyer, but if the goods are destroyed in transit and the supplier receives compensation for the loss (with proper invoicing/recognition per tax authorities), VAT liability should not arise because ownership had not passed to the buyer.   🔗    
• In 2026, VAT on software sales is determined by the buyer’s location and status—transfer of exclusive software rights is treated as a service with the VAT place of supply at the buyer’s registration/residence (Ukraine-registered buyers subject to Ukrainian VAT; non-residents generally not)—so getting the place of supply wrong can trigger VAT errors and assessments.   🔗
• Under Ukraine’s Tax Code (subparagraph 14.1.159), import VAT and exchange rate differences are excluded when assessing economic affiliation with a non-resident—only the actual purchase value of goods, works, or services counts, applying where purchases from that non-resident are at least 75% of non-resident purchases and at least 50% of total purchases.   🔗     The VAT payer’s individual tax number does not change after amendments to the VAT registration regulations because VAT payers keep their previously assigned numbers and laws/regulations do not apply retroactively.   🔗    
• Ukraine’s finance ministry says VAT required by the IMF for individual entrepreneurs can be postponed but cannot be canceled, with a final decision to follow an IMF mission in May–June 2026.   🔗  🔗   🔗    
• VAT can be claimed on the earlier of payment or actual receipt of goods/services, while imports use the paid-tax date, non-resident services use the issued/registered invoice date, financial leasing uses when the lessee receives the asset, and long-term contracts use when the customer actually receives the work results as evidenced by documents.   🔗  

United Kingdom

• The Upper Tribunal held that VAT rebates under Article 90 can only reduce taxable amounts when the payer’s payment is directly and identifiable linked to specific taxable supplies, so only BIL payments to DHSC related to those supplies qualify and payments via wholesalers or pharmacies do not.   🔗    
• Clearwater Hampers successfully appealed HMRC’s decision that lidded wicker basket packaging for gift hampers were separate standard-rated supplies, with the tribunal holding they were ancillary and applying a composite VAT rate based on the value mix of the food and drink items.   🔗    🔗    
• In Kwok v HMRC, the First-tier Tribunal awarded the taxpayer costs on the standard basis after HMRC’s late withdrawal of a VAT input VAT recovery appeal was held to be unreasonable conduct, declining a summary assessment due to the claim’s size and complexity.   🔗    
• The FTT dismissed Mr Butt’s appeal, upholding his director’s liability for the VAT input denial penalty by finding he had blind-eye (or at least means of) knowledge of Quantum’s transactions being linked to VAT fraud under the Kittel principle.   🔗    
• HMRC has updated VAT Notice 701/1 for charities, introducing from 1 April 2026 new rules under which businesses may not have to account for VAT when donating goods to charities if specified conditions are satisfied.   🔗    
• The Isle of Man will introduce from April 1 VAT relief allowing VAT-registered businesses to donate qualifying goods to registered charities without a VAT charge, provided the goods are generally valued under £100 and the charity can evidence receipt.   🔗    
• Voluntary disclosure—telling the tax authority about past VAT non-compliance—can reduce penalties and help you negotiate payment arrangements, often resulting in more favorable treatment than if you’re discovered. Backdating VAT registration, while requiring historical sales records and payment of any owed VAT, aligns registration with when taxable activity began and can reduce enforcement pressure by correcting the issue proactively.   🔗    
• HMRC accepted the Court of Appeal ruling that public funding for further education is third‑party consideration for VAT purposes (not outside-scope grants), will consult before making any policy changes, and will apply VAT changes prospectively for non-adopters while requiring ongoing compliance for those already treating the funding as third‑party consideration.   🔗 🔗  🔗  🔗  🔗
• HMRC has decided not to appeal a Court of Appeal ruling that lets colleges reclaim VAT on pre-2010 building projects, ending a nine-year dispute involving Colchester Institute. The ruling is likely to affect around 20–30 colleges with similar claims. Colleges that used the same VAT discount approach as Colchester may be treated like private schools, potentially losing tax relief worth millions. HMRC says it will consult stakeholders and update guidance, and colleges that do not match Colchester’s position can continue current reliefs until new rules are issued. Separately, colleges face uncertainty about continued charitable tax reliefs and are urged to review their eligibility.   🔗   
• The UK has temporarily suspended VAT charges on free post-trial drugs after pharmaceutical companies complained that the tax discourages clinical research and early access programs, prompting the government to review the policy to protect patients and the UK’s life-sciences reputation.   🔗     The FTT upheld HMRC’s disapplication of Nissi N Nissi Ltd’s option to tax for a nursery property, denying input tax of £606,164 because anti-avoidance rules applied—even where an exempt occupier partially funded the development—with no de minimis threshold in the legislation.   🔗    
• From 1 July 2026, the Isle of Man will remove VAT relief on Motability vehicle top-up payments, applying the standard 20% VAT rate to top-ups for higher value vehicles. The change does not apply to vehicles designed or permanently adapted for wheelchair or stretcher users, aligning with UK legislation under the Customs and Excise Agreement 1979.   🔗    
• In Nellstar Properties Ltd, the FTT upheld HMRC’s extended 20-year time limit for VAT assessments because the hotel extension was correctly treated as standard-rated and the director deliberately misclassified it, causing under-declared VAT.   🔗     In Dowey v HMRC, the FTT struck out Mr Dowey’s appeal for repayment of input VAT incorrectly charged by his supplier, holding it had no jurisdiction because under ss 80 and 83(1)(t) VATA 1994 only the supplier who accounted for VAT to HMRC has the statutory right to claim.   🔗    
• HMRC has significantly increased VAT inspections of large and medium businesses—shifting toward technical scrutiny and boundary-pushing positions—leading to more late-payment penalties and prompting firms to improve documentation and compliance to reduce risk.   🔗    
• VAT penalties can be charged for incorrect VAT returns, including understating output tax, overclaiming input tax, or agreeing to a knowingly low VAT assessment. Penalties depend on the severity and intent: 30% for errors without reasonable care, 70% for deliberate errors that aren’t concealed, and 100% for deliberate errors that are concealed; no penalty applies when reasonable care is taken. “Reasonable care” isn’t strictly defined, but HMRC looks for appropriate actions, good record-keeping, and prompt notification of errors. Unprompted disclosure (self-reporting) can reduce penalties, so businesses should routinely review their VAT positions and report mistakes before HMRC identifies them.   🔗    
• Lycamobile is appealing to the Court of Appeal over a roughly £51 million VAT dispute, arguing that VAT on its mobile phone bundles should be due only when services are used rather than when payment is received.   🔗    

---

---