The Council adopted on 5 May 2009 a directive allowing – on a permanent basis – the optional use of reduced rates of value-added tax (VAT) for certain labour-intensive local services, for which there is no risk of unfair competition between service providers in different Member States. Examples are minor repair services (bicycles, shoes and leather goods, clothing and household) and renovation services (private dwellings), certain cleaning and domestic care services, hairdressing and restaurant and catering services.
Reduced rates on labour-intensive local services have so far only been allowed on a temporary basis. Where a reduced rate is allowed, this must amount to at least 5 % of the value of the supply.
The Directive will enter into force on the first day of the month following that of its publication in the Official Journal.
Related links: EC Website on VAT rates