Not only companies involved in climate protection will benefit from the new VAT regulations: the lower tax will also make it easier for the health care sector and organizations paving the way for the European Union’s digital future.
The standard minimum VAT rate in the EU for all goods and services equals 15%. This does not apply to products and services on a particular list, for which the reduced VAT rate must be at least 5%. The tax rates vary from one EU country to another and from one product to another. Some countries have also agreed on special rates for specific products.
Which products will fall under the new, favourable rules? The agreement will allow EU governments to apply lower VAT rates to products and services that prepare the economy for the digital age. These include Internet access and live streaming of cultural and sporting events.
The latter group of services has become increasingly important since the beginning of the covid-19 pandemic. With other pandemic experiences in mind, ministers agreed to add health care equipment, such as face masks and other medical equipment, and articles considered essential for people with disabilities to the list of goods subject to a lower VAT rate.
Crucially for companies and organizations committed to protecting the planet, lower VAT will also be applied to products linked to the fight against climate change, such as bicycles, green heating systems and solar panels installed in private homes and public buildings. These are just some of the products that the new rules will cover.
On CO2 reduction: Some of the existing lower VAT rates on fossil fuels or other goods contributing to greenhouse gas emissions will be phased out by 2030. This is to help the 27 EU countries meet their target of emitting zero CO2 by 2050.
On the one hand, therefore, pro-environmental organizations will gain from the new regulation, but those that negatively impact the state of our atmosphere will lose out. Lower rates could be introduced after the European Parliament consulted on the agreement. The consultation may last until March 2022.