EU pushes for 15% minimum VAT rate

The EU is consulting on a draft directive that would make permanent the provision in the EU VAT Directive that requires all member states to levy a minimum standard VAT rate of at least 15%, which is set to lapse from the beginning of this year

In the absence of the measure, the temporary restriction would be repealed as from 1 January 2018, enabling member states to potentially lower their VAT rates to any level. The restriction is intended to prevent aggressive tax competition between states.

The current lowest VAT rate tax in the EU is Luxembourg's, at 17%. It was raised from 15% after the January 1, 2015, change to EU VAT place of supply rules for broadcasting, telecommunication, and electronic services to the location of the consumer, in a move also intended to prevent aggressive tax competition.

The latest proposal to make permanent the restriction, first established temporarily in 1996 and extended regularly since, comes amid a wider review intended to relax restrictions on member states' ability to set their own rates of value-added tax on different goods and services.

That work is part of the development a definitive VAT regime for the EU centred on taxation in the location of the consumer. The Commission has said it is appropriate as part of that process to set a permanent minimum rate of 15% for member states' VAT regimes.

The consultation on the proposal for a Council directive amending directive 2006/112/EC on the common system of VAT, with regard to the obligation to respect a minimum standard rate, as set out in Article 97, closes on 13 February.

The wider consultation on reform of the VAT regime closes on 20 March.

Public Consultation on the reform of VAT rates is here.

Report by Pat Sweet

Pat Sweet |Reporter, Accountancy Daily [2010-2021]

Pat Sweet was the former online reporter at Accountancy Daily and contributor to the monthly Accountancy magazine, pub...

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