01.04.22

EU Council reaches agreement on updated rules for VAT rates

On 7 December 2021, the EU Council received an agreement to update EU rules on VAT, the purpose of which was to ensure that member states are treated equally, with the bonus of allowing more flexibility to apply reduced and zero rates. There is also a ‘green’ initiative behind the rules, to phase out preferential treatments for environmentally harmful goods.

The EU Council also updated the list of goods and services for which reduced VAT rates are allowed (Annex 111 of the VAT Directive). The Council decided to limit the number of items to which reduced rates could be applied, recognising that these could accumulate.