Compliance Category: Informations sur le taux de TVA/G(S)ST

Upcoming VAT rate changes

Estonia has adopted the draft law to increase the standard VAT rate in the country from 20% to 22% from 1 January 2024.  

Estonia has also approved the following VAT rate changes, effective 1 January 2025:

  • Accommodation VAT rate increase from 9% to 13% 
  • VAT rate increase for press publications from 5% to 9% 

It is important to note that the 13% VAT rate approved for 1 January 2025 is a new VAT rate that does not currently exist in Estonia, with the 9% reduced VAT rate currently co-existing alongside the standard 20% VAT rate. 

Kofax will support the new VAT rate approved for 1 January 2025, but we will first turn our attention to supporting the new standard rate of 22% from 1 January 2024. 

Kofax will be in contact with impacted Estonian suppliers and buyers in Q3 with further details to facilitate the new VAT rate. 

  

VAT rate consolidation delay

Belgium’s e-invoicing and e-reporting plans formed part of wider tax reforms in the country, which included a potential VAT rate consolidation.  

Belgium’s planned wider tax reforms have, as of late collapsed, in part due to a degree of political instability in the country. This means that the envisaged plans to consolidate the reduced and super-reduced rates into a single 9% VAT rate have, for now, also halted.  

This in turn raises further questions about the timeline around Belgium’s B2B e-invoicing and e-reporting mandate. While the Belgian government has not communicated any official timelines, this potentially also places the July 2024 inception date in some doubt. 

Belgian is a critical and compliant market for Kofax. We are closely following the mandate implementation, with a view to categorically confirming when we can expect e-invoicing and e-reporting to commence in the country. 

  

Proposed VAT rate changes

Having reviewed its existing VAT rates, Romania is now considering the abolition of its 5% reduced VAT rate, with the Coalition government now set to debate the measure.  

The abolition of the 5% VAT rate may not provoke immediate changes in the Kofax system, if confirmed. Suppliers may need to raise credit or debit notes some time after a VAT rate ceases to be effective. Nevertheless, Kofax will monitor any confirmation in this respect. 

The Romanian government is also proposing that restaurant, catering and cultural services are increased from the 9% reduced VAT rate to 19%, the standard VAT rate in Romania. 

Romania is a compliant territory for Kofax, and our e-invoicing solution captures all valid VAT rates in the country. 

The Czech Republic – VAT rate consolidation

Kofax has been monitoring tax rate changes in The Czech Republic, which edge closer to the final approval stages to implement an upcoming VAT rate consolidation projected for January 2024. You can read more about the proposed changes here. 

In recent developments, the lower Czech house in Parliament has agreed to government proposals for the VAT rate consolidation, with the Bill now expected to proceed to the Upper House for review. 

Kofax is cognizant of the impending 1 January 2024 deadline. We are closely following the VAT rate change approval in the Czech Republic and will support the VAT rate change if and once confirmed. 

Cyprus- New super-reduced VAT rate

The introduction of new VAT rates can pose problems for businesses, who will need to adapt systems and categorisations to accommodate such rates. However, they are often viewed as an effective fiscal strategy for governments to manage their tax agendas.  

The European Union has recently provided EU Member States with greater flexibility to dictate their own VAT rates. These concessions extend to the introduction of super-reduced VAT rates, which previously could not be set below 5%. This restriction has now been abolished, and it is likely that several Member States will take advantage of this to introduce new categories of goods / services subject to the super-reduced rates in line with specific wider fiscal and social initiatives.  

Cyprus is the one of the first countries to take advantage of this increased latitude, via the introduction of a super-reduced rate of 3% VAT for specific goods and services. This will co-exist alongside the 19% standard VAT rate and 5% reduced VAT rate and will be effective from 21 July 2023. 

The new 3% rate will impact the following goods and services: 

  • Goods, including specific books, certain lifting devices, vehicles specific to people impacted by disability, orthopaedic items and appliances, and other specific items which can assist people living with a disability.  
  • Services, including specific cleaning services performed by private entities, waste treatment and debut performances for specific cultural activities. 

In addition to the new 3% super-reduced VAT rate, the Cypriot government has re-categorised several of its goods and services under the zero VAT rate. This re-classification is also currently active and will last until 31 October 2023, in contrast to the new 3% super-reduced rate, which is expected to be a permanent feature. 

The law relating to both the new super-reduced rate and the re-classification of goods can be found here. 

Cyprus is a compliant territory for Kofax, and the Tungsten Web Form Portal supports the new rate. Kofax is communicating with impacted Cypriot suppliers and buyers to facilitate the new super-reduced VAT rate. 

  

Bavaria proposal to abolish VAT on all food  

Dissimilar to many of its counterparts across the continent, Germany operates a Feudal System, where, for the most part, Feudal States maintain a distinct sense of autonomy in the conducting of their tax affairs. This looks set to change with the introduction of Germany’s B2B e-invoicing mandate. 

However, VAT rates are still currently determined on a Federal, rather than nationwide, level. Bavaria is a good example of this, proposing a zero VAT on all basic food products. Its proposal follows the path of nearing countries Pologne et Espagne, who have proposed and implemented similar initiatives this year.  

The proposal precedes elections in Bavaria, indicating how fiscal policies are linked to wider political agendas, and how fiscal policies can play a pivotal role in influencing resident votes. 

Germany is a critical market for Kofax. We are closely following tax rate changes in the country, alongside the upcoming B2B mandate. You can read more about Germany’s e-invoicing mandate here. 

  

Proposal for reduced rates for recyclable products

Last month saw the Czech Republic approach the European Commission to reduce the VAT rate on recycled products. While the European Commission has afforded EU Member States increased freedom to dictate some VAT rates, notably, this still eluded recyclable products.  

In line with much of the domestic legislation established by EU Member States, this initiative showcases the European Commission’s intention to endorse policies that can benefit wider environmental concerns. The draft is currently only at proposal stage, but growing environmental consciousness strongly suggests there will be support for the motion.  

Kofax will closely monitor any reduced rates introduced in direct response to the proposal and ensure if not already present that they are incorporated as part of our e-invoicing solution.  

Reduced VAT extension on food products

Ongoing inflation is prompting countries to deploy new fiscal strategies- or extend current ones. Our recent posts have captured Spain’s fluctuating VAT rates targeting specific niche sectors as it endeavours to restore some stability to its wider economy.  

Much in the same way as Poland this month, Spain has opted to extend the zero VAT rate on certain food products until 31 December 2023, therefore extending the measures outlined in Royal Decree-Law 20/2022, which were initially expected to last until 30 June 2023. Specific other reductions on pasta and seed oils from 10% to 5% will also continue until the end of the year. However, unlike Poland, Spain has caveated that the extension will only apply if inflation is below 5.5%, indicating that fiscal policies are intrinsically linked to wider economic concerns- with inflation currently at the forefront of many EU Member States’ concerns.  

It is currently expected that Spain’s previous 4% VAT rate for specific food products will be reinstated on 1 January 2024, alongside subsiding inflation.  

Spain is a compliant territory for Kofax and we support all valid VAT rates in the country as part of our e-invoicing solution today. 

Reduced VAT extension on food products

While Poland’s reduced VAT rate for food products was initially projected to last until the middle of 2023, the Polish government has yet further extended this feature. This was initially extended in November 2022, as stated on the Polish Government Website. 

The zero VAT rate for basic food products will now take effect until the end of 2023, once again re-affirming that EU Member States are compelled to extend fiscal policies to curb persistent inflation. In Poland specifically, inflation has reached an unwelcome high, reaching 18% in the first quarter of the year. Savings because of extending the reduced VAT rate are expected to be profound – amounting to c. PLN 5 billion, confirming that shifting VAT rates can have a sizeable and direct impact on consumer spending habits and savings.  

The Ordinance relating to the VAT extension can be located here. 

VAT rate hikes from July 2023

The Turkish Revenue Administration has amended VAT rates with a presidential decision issued on July 7th. 

In accordance with presidential decision No. 7346, the standard VAT rate will increase from 18% to 20%, while the reduced VAT rate will increase from 8% to 10%. No changes will be made to the reduced VAT rate of 1%.  The VAT rate changes will become effective on July 10, 2023. 

Lower VAT rate for recycled products

2022 and 2023 currently is witnessing a proliferation of measures relating to limiting single-use plastic, but more generic fiscal measures can also prove effective in fostering positive environmental behaviours. 

To incentivise recycling, the Czech Republic is advocating lower VAT rates for the use of recycled products, with the clear aim of promoting the purchase of recyclable products.  

To this effect, the Czech Republic has issued an application to the European Commission outlining its proposals. 

Notably, a specific potential reduced VAT rate has not yet been touted by the Czech government, indicating that the proposal still requires further definition.   

While the EU Commission has recently afforded Member States significantly increased autonomy to determine VAT rates, the reduced rate category, which can be applied with greater liberty, does not yet extend to products incorporating recyclable content. The proposal is therefore intended to stimulate not only a discussion pertinent to the Czech Republic specifically, but also more widely to other EU Member States, who may find themselves contemplating similar concerns at a future point. 

The Czech Republic’s proposal to the European Commission can be located below: 

pdf (europa.eu) 

The Czech Republic is a compliant territory for Kofax. We will support any new VAT rates confirmed further to this proposal as part of our e-invoicing solution. 

VAT re-classifications of specific products

The introduction of new VAT rates are not the only changes countries deploy as part of their fiscal strategies. Less radical measures, such as re-classifying specific goods and services under existing tax rates, also serve as an equally effective measure.  

Finland is re-classifying the following good and services, in line with the following: 

Goods / services now subject to 14% (up from 10%): 

  • Books 
  • Hotel services 
  • Public transport 
  • Pharmaceuticals  
  • Entrance to cultural and sporting events  
  • Film screenings 
  • Royalties for television and public radio activities 

Goods / services now subject to 24% (up from 14%): 

  • Specific feminine hygiene products  
  • Specific products for baby care 

Kofax’s e-invoicing solution already accommodates all valid rates for Finland, a compliant territory, as part of our e-invoicing solution.  

Potential new VAT rate

The VAT landscape is set to change quite dramatically as the EU has afforded countries greater latitude to determine their own tax rates. This, combined with a post-pandemic era where countries strive to restore economic stability, means we can expect VAT rate changes to be the norm rather than the exception in 2023 and beyond.  

Cyrus has approved the decision to implement a new 3% VAT rate which will apply to the following products: 

  • books, magazines, and similar products, whether provided on a physical basis or in electronic form 
  • stairs, lifts, and wheelchairs for persons with disabilities 
  • orthopaedic devices 
  • street cleaning and dog collection services 
  • waste water disposal and treatment 
  • entry to the debut of theatrical, musical, dance or classical performances. 

The Council has also enacted the re-categorisation of certain VAT products, including the introduction of a zero VAT rate for the following: 

  • typewriters with braille characters and similar electronic devices 
  • wheelchairs for persons with disabilities exclusively for their personal use. 

These VAT rate changes still need to be confirmed by the Cypriot Council of Ministers.  

Cyprus is a compliant territory for Kofax and we are following developments around the proposed VAT rate changes. 

We will support the new 3% rate if confirmed and incorporate all valid VAT rates as part of our e-invoicing solution in the country.  

Proposed new VAT rate

Romania has had a busy 2022, with its implementation of a partial e-invoicing mandate for high-risk fiscal products. With concrete plans for a universal B2B e-invoicing mandate yet to be defined (and likely hindered somewhat by the VAT in the Digital Age (ViDA) proposal), the country is also turning its attention to VAT rates in the country.  

The Romanian Senate is pondering a new 9% reduced rate for food and beverages.  

The new proposed 9% VAT rate would exclude the following: 

  • alcoholic beverages 
  • specific non-alcoholic beverages falling under CN codes 2202 10 00 and 2202 99. 

The proposal for the new VAT rate was registered for debate at the Romanian Senate in June 2023.  

Romania is a complaint territory for Kofax and we will incorporate all valid VAT rates as part of our e-invoicing solution. We are closely monitoring developments around the new proposed rate and will support it if confirmed.  

Estonia – miscellaneous VAT rate changes 

European Union (EU) Directives typically provide a basis for Member States to absorb EU legislation into their own national legislative frameworks. It is customary practice for Member States to adopt EU law into their own domestic legislation. However, major international incidences such as the pandemic will have exposed the varying needs of each Member State as they encountered unique and exclusive challenges. The EU will have been keenly aware that a single legislative order may not accommodate the fluctuating needs of every Member State.  

An EU Directive, published in the EU Official Journal in April 2022, afforded Member States with increased flexibility to set their own VAT rates, despite some broad restrictions still enduring. Consequently, we can expect VAT rate changes to be ubiquitous in 2023 and beyond. 

Following the path of Suisse and the République tchèque, who are in the process of amending VAT rates as part of a major fiscal overhaul in their respective countries, Estonia is the latest country to announce a VAT rate change in the country.  

On 12 June 2023, the coalition government approved the following VAT rates: 

  • 1 January 2024: Standard rate increase from 20% to 22%  
  • 1 January 2025: Reduced accommodation VAT rate increase from 9% to 13%  
  • 1 January 2025: VAT rate increase for press publications from 5% to 9% 

The bill incorporating the new VAT rates was approved on 19 June 2023.  

Estonia is a compliant territory for Kofax and we will support the VAT rate changes as part of our e-invoicing solution for both Web Form and Integrated Solution Suppliers.  

Our portal solution will include the new VAT rates in readiness for 1 January 2024 / 2025 as required. We will be in touch with impacted Integration Solution suppliers to manage accommodation of the new VAT rates.