EU VAT

Greece presents new bailout proposals

Greece new bail out proposals

Greece have outlined their latest VAT proposals since the ‘No’ referendum last Sunday, so far their main points include:

• Cuts to military spending.
• VAT changes.
• Corporate tax increases.
• Raising retirement age to 67.
• Crack down on tax fraud.
• Increase tax on shipping companies.

The key VAT points are:

• 30% relief for Greek islands to be scrapped – only the most remote islands will keep these tax breaks.
• Restaurants and catering services VAT will rise from 13% to 23%.
• Reduction of the 6.5% to 6%, now only applicable to books, theatre admission and certain medicines.
• A Reduced 13% tax on basic foodstuffs. Continue Reading

Romania’s potential new reduced VAT rate & the success of the food VAT rate drops

Romania potential new reduced VAT rate & the success of the food VAT rate drops

Romania’s Lower House of Parliament has approved plans to introduce a new reduced rate of VAT to 5% for cultural services, lower value houses and printed media. The new 5% VAT rate would apply to books, newspapers, magazines, and tickets to museums, monuments, cultural events, cinemas and sporting events.

More approvals from the Upper House of Parliament still need to be received before this reduced VAT rate can be introduced.

Romania’s recent success

Romania has recently seen success in lowering the tax rate on food products by 15% (see previous eBiz Answers post). From this they have seen an increase of 17% in the number of products sold in the first 2 weeks, compared to figures from last year, with coffee seeing the biggest increase in sales, going up 25%. Overall sales were 12% higher than in May and 17% higher than June 2014.

Greek financial crisis – possible VAT changes

July 2015

Greek VAT reforms in the economic crisis

Yesterday Greece became the first European Union country to miss their deadline to repay a loan, totaling around £1.1bn, from the International Monetary Fund (IMF), after their request for another extension for the previous bailout was denied on Tuesday. By being in arrears to the world’s financial backbone, Greece immediately lose access to IMF resources and could eventually be kicked out of the fund entirely. If the country goes bankrupt or decides to leave the 19-nation Eurozone, the situation could create instability in the region and resonate around the globe.

Greece’s total debt is around €360,000,000,000 which is 180% of its GDP and with around 25% of its citizens unemployed what are Greece doing to try and combat this economic crisis?

Greece’s latest proposals are focused on VAT rates, early retirement measures and tax increases, which aim to cover a good part of the country’s budgetary gap, which is around €900M, the proposals around VAT could bring in around two billion euros. In terms of the VAT proposals last week the government offered VAT increases on a range of products, so the standard rate of 23% would remain but the scope would change with the standard rate being extended to more products including:

• Water supplies
• Transport of passengers
• Social housing
• Repairs to private housing
• Agricultural imports
• Social services
• Food Outlets
• Hotel stays

But nothing is so far confirmed with many other products and services also in the mix for potential VAT raise and the lower 6% reduced rate could be limited to books and medical supplies. Greece’s creditors also want the 30% VAT discount applied to Greek islands eliminated making VAT uniform throughout the country but Greece wants to keep the discount in place. Continue Reading

Romania to cut VAT on food products to 9%

Food chain welcomes early cut on VAT

Romania will cut value added tax (VAT) for all food products to 9% from 24% starting on the 1st of June 2015, six months earlier than planned as budget revenue is higher than expected, after cutting budget deficit to 1.8% of GDP last year from 7.2% in 2009 by a series of measures including cuts in state salaries, limits in public employment and tax hikes, the Romanian Government has announced.

The law extends the scope of the reduced VAT rate to food, including beverages but excluding alcoholic beverages, animals, and live poultry from domestic species, seeds, plants, and ingredients normally used in food preparation, and also restaurant and catering services, excluding sales of alcoholic beverages. Applying the cut to the whole food chain makes it easier to manage. Continue Reading

UK last major supporter of higher VAT rates on e-books

UK last major supporter of higher vat rates on e-books

France, Germany, Italy and Poland have called on the European Union to allow the EU member states to levy a reduced rate tax on e-books, to match that charged on physical copies. As many countries try to build their digital economy a lower VAT on e-books is a good step forward.

France currently charge 5.5% VAT on e-books whereas the UK charge their standard rate of 20%. However in a court ruling in the last few weeks it was declared that France and Luxembourg were breaking the EU VAT directive by charging their reduced rates on e-books and it has now been ruled that they must increase this to their standard VAT rates. Continue Reading

Court rules in favour of higher VAT rate on e-books

Court rules in favour of higher VAT rates on e-books

The UK and Germany pressured the European commissions (EC) to challenge the reduced VAT rates currently charged by Luxembourg and France on e-books, matching what they charge in printed copies, whereas the UK and Germany charge 0% and 7% respectively on printed books but charge their standard rates of 20% and 19% on e-books.

Under the EU VAT directive countries are allowed to levy a reduced or 0% rate on printed books. However it didn’t have an official on ruling e-books, which implies that the countries standard rates should be applied. However France and Luxembourg decided to go against this and treat e-books the same as printed copies, with Italy and Malta also joining them later on.

However after being pushed by the UK and Germany for a decision the European court of justice has ruled that e-books do not have the same characteristics of printed books and therefore cannot be subject to the same reduced rate. Meaning e-books are liable to the standard VAT rate in EU states, this is on the basis that it is a service and hence not listed in the EU directive as being subject to reduced rates.

This ruling means that France and Luxembourg now have to increase the VAT charged on e-books, with France making the change affective from 1 Jan 2016, and Luxembourg making the change from 1 May 2015.

Romanian VAT decrease to 20%

Romania to cut VAT rate

Having raised its VAT to 24%, from 19%, in 2010, making it the 5th highest in the EU, Romania has now committed to bringing back a lower tax rate and are planning to lower their tax rate to 20% in 2016, with a potential of a further 2% decrease to 18% in 2018 if it’s financially viable. Additionally there would be a drop from 24% to 9% for meat, fish, fruit, vegetables and other basic foodstuffs. Whilst this would result in over €2.5b budget impact, it is hoped that the lower rate will help to increase the compliance levels which saw a 3% decrease after the VAT increase was implemented in 2010.