News Article

VAT-battle: One Against All?

Laws & Regulations

BRUSSELS, Belgium (Jan 30) – Last week, 22 EU member states finally reached an agreement on the prolongation of the reduced VAT rate on labour-intensive services, among which bicycle repairs, until 2010. The Czech Republic, Cyprus and Poland however continued to block the agreement. The Council’s decision on this issue has to be unanimous. The […]

BRUSSELS, Belgium (Jan 30) – Last week, 22 EU member states finally reached an agreement on the prolongation of the reduced VAT rate on labour-intensive services, among which bicycle repairs, until 2010. The Czech Republic, Cyprus and Poland however continued to block the agreement. The Council’s decision on this issue has to be unanimous. The three member states were very dissatisfied because they did not get permission to continue a number of transitional measures. It mainly concerned the application of the reduced VAT rate on children’s books, food and the building of new houses.
In the end, the Austrian Presidency decided to grant the three “rebels” time for reflection until the end of the week. By Sunday, the Czech Republic and Cyprus had given up their opposition. Poland however had not been in touch.
In view of the disaster, which took place in Katowice in the weekend, the Presidency decided to grant Poland some more reflection time. If this one member state keeps to its njet, then the Commission can start infringement procedures against those countries that continue to apply the reduced VAT rate to the labour-intensive services concerned. In theory, that rate should already have been abolished on 31 December last year. The end of the rate would imply that Belgium, Luxembourg, Holland and Poland (!) should have to apply the normal VAT rate of minimum 15% to bicycle repairs again.

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