14 February 2022

VAT rates – greater flexibility for Member States Factsheet

From 1 January 2025 Member States will have more flexibility to set Value Added Tax (VAT) rates in their country below the standard rate. A wider range of goods and services will be allowed to benefit from reduced rates, if the Member State so wishes. This is to reflect policy areas vital for Europe – the fight against climate change, the digitalisation of the economy and lessons learnt from the Coronavirus crisis.

While this is not likely to create significant distortions of trade between Member States, the EU VAT landscape will become more complex for businesses transacting across multiple Member States. This could particularly impact small and medium-sized enterprises (SMEs).

It is important for accountants to be aware of these potential changes before their introduction and keep up to date with changes in other Member States where their clients may also operate.

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