A European Union consultation is ongoing on a draft Directive that would make permanent the provision in the EU VAT Directive that requires all member states to levy a minimum standard VAT rate of at least 15 percent.
In the absence of the measure, the temporary restriction would be repealed as from January 1, 2018, enabling member states to potentially lower their value-added tax rates to any level.
A news report by Tax-News.com stated that the restriction was intended to prevent aggressive tax competition between states in the area of value-added tax.
Currently, the lowest rate of value-added tax in the EU is Luxembourg’s 17 percent. The country increased its rate from 15 percent after the January 1, 2015, change to EU VAT place of supply rules for broadcasting, telecommunication, and electronic services to the location of the consumer, in a move also intended to prevent aggressive tax competition between states for companies selling electronic services to consumers in other member states.
According to the news report, the consultation, which will run until February 13, 2018, covers the proposal for a Council Directive amending Directive 2006/112/EC on the common system of VAT with regard to the obligation to respect a minimum standard rate as set out in Article 97.
The news medium reported further that the latest proposal to make permanent the restriction, first established temporarily in 1996 and extended regularly since, comes amid a wider review intended to relax restrictions on member states’ ability to set their own rates of value-added tax on different goods and services.
“That work is part of the development a definitive VAT regime for the European Union centered on taxation in the location of the consumer. The Commission has said it is appropriate as part of that process to set a permanent minimum rate of 15 percent for member states’ VAT regimes”, the online medium added.