The Commission welcomes the agreement reached by EU finance ministers today to update the current rules governing value-added tax (VAT) rates for goods and services. These new rules will provide governments with more flexibility in the rates they can apply and ensure equal treatment between EU Member States. At the same time, the updated legislation will bring VAT rules into line with common EU priorities such as fighting climate change, supporting digitalisation and protecting public health. The European Parliament must now be consulted on this final text.
Today’s agreement will ensure that EU VAT rules are fully aligned with the EU’s common policy priorities. Today’s announcement will address these issues by:
- Updating the list of goods and services (Annex III to the VAT Directive) to which all Member States can apply reduced VAT rates. New products and services added to the list include those that protect public health, are good for the environment and support the digital transition. Once the rules come into force, Member States will for the first time also be able to exempt from VAT certain listed goods and services considered to cover basic needs.
- Removing the possibility by 2030 for Member States to apply reduced rates and exemptions to goods and services deemed detrimental to the environment and to the EU’s climate change objectives.
- Making derogations and exemptions for specific goods and services, currently in place for historical reasons in certain Member States available to all countries to ensure equal treatment and avoid distortions of competition. However, existing derogations that are not justified by public policy objectives other than those in support of EU’s climate action will need to end by 2032.
A press release and Q&A are available online.
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