Reduced VAT rates - regulatory changes until 31 December 2024 required

On 6 April 2022, the VAT Directive was amended with regard to the reduced VAT rates. One objective is to eliminate old injustices. In addition, the VAT rate is increasingly being viewed as an important tool in climate protection.

Some of the new regulations:

  • Annex III to the VAT Directive, which lists the goods and services that can be taxed at a reduced rate, is being updated and expanded. The main new additions are areas that serve to promote climate protection, such as solar panels and the supply of electricity, district heating, district cooling and biogas, as well as heating systems if certain environmental requirements are met. Bicycles, and their rental and repair, are also included. The inclusion of live streaming of events is another step forward in adapting regulations to the digital age. There are also further discount options in the medical sector.
  • From 2030 onward, fossil fuels will no longer be allowed to be taxed at a reduced rate.
  • Old special rules that applied only to certain Member States will be made available to all Member States in the spirit of equal treatment for all.
  • The number of possible reductions is made uniformly consistent: 24 categories can be selected from Annex III, to which up to two reduced VAT rates of at least 5 % can be applied. In addition, a reduced rate of less than 5% and a zero rate with an input VAT deduction may be applied to up to seven categories.

Member States must adapt their national laws to the new regulations by 31 December 2024.

(Dated: 12 May 2022)