Aside from the landmark decision of the European Court of Justice on March 5, 2015 that ebooks cannot benefit from the same reduced rate of VAT as paper books, there have been several noteworthy Value Added Tax (“VAT”) changes in the European Union (“EU”) over the past year. Below is a synopsis of some of the major VAT changes for rates as well as substantive VAT law changes that took place within the EU and its Member States.
European Union
Bitcoin is Exempt from VAT (C‑264/14)
On October 22, 2015, the European Court of Justice (“ECJ”) ruled that exchange of bitcoin and other virtual currencies are exempt from VAT under the EU VAT Directive just like traditional currency.
Extension of the 15% Minimum Standard VAT Rate Requirement
Under the existing language of Article 97 of the EU VAT Directive, the requirement that no Member State apply a standard rate of VAT less than 15% would have expired effective December 31, 2015. However, the European Commission has adopted Proposal COM (2015) 646 that extends the requirement until December 31, 2017.
Austria
VAT Reform Enacted
From January 1, 2016, a 12% reduced VAT rate was replaced with a new 13% rate. The 13% rate now applies to many transactions that were previously subject to a 10% reduced rate in Austria, including animals, seeds, plants, as well as certain wine sales. Further, the 13% rate also applies to sporting events, which were previously standard-rated. The new rate will also apply to cultural events and hotel accommodations effective May 1, 2016.
Greece
Required Austerity Measures Enacted
On July 16, 2015 the Parliament of Greece passed Law 4334/2015, which was immediately followed by Ministry of Finance Decree POL 1154/2015. The result of this legislative change as it relates to VAT is as follows:
- The special reduced rate of 13% applicable to most food items was modified such that many food products are now subject to the standard rate of 23%.
- The super reduced rate applicable to items such as medicines and publications was reduced from 6.5% to 6%.
Additional changes took effect on October 1, 2015, including an increase to the rate applicable to accommodations.
Italy
Reduced Rate Extended to Digital Periodicals
The Italian Congress approved the 2016 budget law that took effect on January 1, 2016 and includes an extension of the 4% VAT rate afforded to print periodical publications to also contain electronic periodical publications, such electronic magazines, journals, and newspapers.
Luxembourg
Repeal of Reduced Rate on eBooks
Pursuant to the European Court of Justice (ECJ) decision in European Commission v. Grand Duchy of Luxembourg (Case C -502 /13), Circular No. 756bis repealed Circular No. 756, which specified that the term “book” does not distinguish between the physical media and digital media and that the same rate that applies to books would apply to e-books. Thus, the 3% VAT rate on ebooks was increased to apply the standard VAT rate of 17% effective May 1, 2015.
Portugal
Changes to the Reduced and Super Reduced Rates in Azores
Portugal enacted Law nr. 63-A/2015 that became effective as of July 1, 2015. Under the law, the existing 10% reduced rate applicable in the Azores further decreased to 9%. Likewise, the existing 5% super-reduced rate further decreased to 4%. Examples of items now subject to the 4% rate include, but are not limited to books, magazines, and newspapers.
Romania
Major Revisions to Romania VAT Act
On September 10, 2015, Romania published, in Official Gazette No. 688 published Law No. 227, significant revisions to their VAT Act. Some of the changes are as follows:
- Standard VAT rate reduction of 4% (24% to 20%) effective January 1, 2016.
- The reduced VAT rate is 5% (previously 9% reduced rate) for access to castles, museums, historical monuments, zoos, fairs, exhibitions, and cultural events, cinemas.
- The reduced rate of 5% also applies to school manuals, books, newspapers, and magazines, except for those produced mainly for advertising effective January 1, 2016.
- Standard VAT rate reduction of 1% (20% to 19%) effective January 1, 2017.
- Reverse charge mechanism to be applied to: the supply of buildings, parts of buildings, land, the supply of mobile phones, devices that use integrated circuits, laptops, PC tablets, and game consoles (until December 31, 2018).
United Kingdom
Single Use Plastic Carrier Bag Charge
Effective October 5, 2015, all retailers in England with 250 or more full-time equivalent employees must charge a minimum of 5p for the single-use plastic carrier bags that they provide. Any amount charged for a bag is tax inclusive at the standard rate of VAT. Compulsory charges for such bags already existed in the rest of the United Kingdom.
HMRC Explains 10-Year Modernization Program
HMRC recently issued a briefing that explains its 10-year modernization program, including plans to consolidate the current 170 offices across the UK into 13 large modern regional centers that will accommodate a new digital infrastructure.
