Richard Cornelisse

EUROPA – Press Releases – VAT: Commission Requests To Amend Rules On Reduced Rates

In Tax News on 21/06/2012 at 7:20 pm

United Kingdom

VAT: Commission requests UK to amend its rules on reduced rates

The European Commission has asked the United Kingdom to amend its legislation which allows a reduced VAT rate for the supply and installation of “energy-saving materials”. This measure goes beyond the scope allowed under the VAT Directive.

Under EU VAT rules, Member States can only apply reduced VAT rates to a limited number of goods and services, which are clearly listed in Annex III of the VAT Directive. This list does not include the supply and installation of “energy saving materials”. Therefore, the UK’s application of a reduced rate in this area contravenes EU legislation.

The request takes the form of a Reasoned Opinion (the second stage of an infringement procedure). If the legislation is not brought into compliance within two months, the Commission may refer the matter to the European Court of Justice.

EUROPA – Press Releases – VAT: Commission requests UK to amend its rules on reduced rates.

France

European Commission calls on France to limit the reduced VAT rate to domestic care services

The European Commission has officially asked France to ensure that certain “personal services” should be subjected to the normal VAT rate because they do not, in its view, constitute domestic care services as laid down in European Union law. The request takes the form of a reasoned opinion, which is the second stage of an infringement procedure. If the rules are not brought into compliance within two months, the Commission may refer the matter to the Court of Justice of the European Union.

Background

European Union legislation allows Member States to apply a reduced rate of VAT to domestic care services such as home help and care of the young, elderly, sick or disabled.

France applies a reduced VAT rate to “personal services”, a much broader category which covers, for instance, gardening, home lessons (different from school support), computer and internet assistance at home, maintenance services, and maintenance and temporary guarding of main and secondary residences. This rate also applies to the services of intermediaries operating in the sector.

The Commission considers that applying a reduced VAT rate to these services is not compatible with European Union law.

Moreover, in France, the Conseil des prélèvements obligatoires (in 2010) and the Comité d’évaluation des dépenses fiscales et des niches sociales (in 2011) suggested partially closing this tax loophole for personal services.

EUROPA – Press Releases – European Commission calls on France to limit the reduced VAT rate to domestic care services.

Tax Management Consultancy welcomes your opinion on any of the issues raised, so feel free to join in the discussion on LinkedIn | Twitter | Facebook.

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