Certain services subject to reduced VAT rate09/04/09 / cata_european-union-news
The EU Finance Ministers under the Czech Presidency finally agreed on 10 March 2009 to reduce the value added tax rate for certain services. The draft amendment to Directive No. 2006/112 primarily covers areas where the current exemptions only made it possible to apply VAT lower than 15% by the end of 2010, which could result in considerable price increase for these services after 2010. The initiative constitutes a part of the European Small Business Support Program (Small Business Act).
The reduced VAT rate shall be applied to services with a high amount of human labor rendered locally so that they do not endanger the competition on the common market. The agreed conclusions enable EU Member States to choose whether or not to apply the reduced VAT rates. Therefore the actual tax reduction, as well as selection of particular types of services in this approved group, shall fall within the powers of national authorities. The Directive shall take effect from 1 January 2011.
The European Union hopes this step will help in preserving a large number of jobs and stop price increases for certain types of services. The reduced VAT shall be one of the tools to combat the financial crisis. In addition to this partial amendment, a complex reform of VAT collection is being contemplated.