Council Directive (EU) 2022/542 of 5 April 2022 amending Directives 2006/112/EC and (EU) 2020/285 as regards rates of value added tax

• Celex Number: 32022L0542
• ELI: http://data.europa.eu/eli/dir/2022/542/oj
• Published date: 06 April 2022
• Date: 05 April 2022
• Date of Signature: 05 April 2022
• Official Gazette Publication: Official Journal of the European Union, L 107, 6 April 2022

6.4.2022 EN Official Journal of the European Union L 107/1

---

COUNCIL DIRECTIVE (EU) 2022/542

of 5 April 2022

amending Directives 2006/112/EC and (EU) 2020/285 as regards rates of value added tax

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty on the Functioning of the European Union, and in particular Article 113 thereof,

Having regard to the proposal from the European Commission,

After transmission of the draft legislative act to the national parliaments,

Having regard to the opinion of the European Parliament (1),

Having regard to the opinion of the European Economic and Social Committee (2),

Acting in accordance with a special legislative procedure,

Whereas:

(1) The rules on rates of value added tax (VAT) as provided for in Council Directive 2006/112/EC (3) aim to preserve the functioning of the internal market and to avoid distortions of competition. Those rules were designed over two decades ago based on the origin principle. In its communications of 7 April 2016 on an action plan on VAT – Towards a single EU VAT area – Time to decide, and of 4 October 2017 on the follow-up to the Action Plan on VAT – Towards a single EU VAT area – Time to act, the Commission announced its intention to adjust those rules for a definitive VAT system for cross-border business-to-business trade in goods between Member States that would be based on the taxation in the Member State of destination.

(2) Under a system where the supply of goods and services would be taxed in the Member State of destination, suppliers derive no significant benefit from being established in a Member State with a lower VAT rate. Greater diversity in VAT rates would not, under such a system, disrupt the functioning of the internal market nor create distortions of competition. In those circumstances, it would be appropriate to grant more flexibility to Member States in the setting of rates.

(3) The goods and services eligible for reduced rates should aim at benefiting the final consumer and pursue objectives of general interest. In order to avoid unnecessary complexity and a subsequent rise in business costs, in particular for intra-Community trade, once Member States select such goods and services accordingly, reduced rates would normally be applicable along the entire commercial chain.

(4) The legal framework allowing the application of reduced rates should be overall coherent with other Union policies such as Regulation (EU) 2021/522 of the European Parliament and of the Council (4) and the communication from the Commission of 11 December 2019 on the European Green Deal. In order to enable Member States to apply reduced rates with a view to the strengthening of the resilience of their health systems, it is appropriate to extend the scope of goods and services considered to be essential to support the provision of health care and to compensate and overcome disabilities. Furthermore, Member States should be given the possibility to contribute to a climate-neutral and green economy by means of applying reduced rates on environmentally friendly supplies while, at the same time, preparing the phasing out of the existing preferential treatment of environmentally harmful supplies.

(5) All Member States are to be treated equally and should therefore be given the same possibilities to apply reduced rates, which should however remain an exception to the standard rate. Such equal treatment can be achieved by enabling all Member States to apply to the eligible goods and services, within defined limits, a maximum of two reduced rates of a minimum of 5 %, a reduced rate lower than the minimum of 5 % and an exemption with the right to deduct input VAT.

(6) Taking into account the need to avoid the proliferation of reduced rates for budgetary reasons and the principle of equal treatment, Member States should be allowed to apply reduced rates not lower than the minimum of 5 % to supplies of goods or services covered in a maximum of 24 points in Annex III to Directive 2006/112/EC. For the same reasons, Member States should be free to apply a reduced rate lower than the minimum of 5 % and an exemption with the right to deduct input VAT, but only to supplies of goods or services covered in a maximum of seven points in Annex III to Directive 2006/112/EC that they have chosen among the supplies of goods and services considered to cover basic needs, namely those related to the supply of foodstuffs, water, medicines, pharmaceutical products, health and hygiene products, transport of persons and certain cultural items (books, newspapers and periodicals), or among other supplies of goods and services listed in Annex III to Directive 2006/112/EC to which other Member States apply reduced rates lower than the minimum of 5 % or exemptions with the right to deduct input VAT, as long as they respect the applicable deadlines. It is appropriate to grant the Member States already applying such reduced rates or exemptions the time necessary to adapt to those limits.

(7) It is appropriate to include solar panels among those seven points in line with Union environmental commitments on decarbonisation and with the European Green Deal, as well as to offer Member States the possibility to promote the use of renewable energy sources also by means of reduced VAT rates. In order to support the transition towards the use of renewable energy sources and to foster the Union’s self-sufficiency with regard to energy, it is necessary to allow Member States to improve final consumers’ access to green energy sources.

(8) The exercise of any of those options by a Member State should be construed as constituting a measure embedded in the logic of the system of VAT rates, and adopted for clearly defined social reasons for the benefit of the final consumer or in the general interest.

(9) Along with general rules on VAT rates, there are a number of existing derogations that allow certain Member States to apply lower rates. Those lower rates are justified by specific geographical features or by social reasons that are for the benefit of the final consumer or are in the general interest. Such lower rates could be relevant for other Member States. In line with the principle of equal treatment, it is therefore appropriate to provide for an option, open to all Member States, to apply lower rates to the same goods and services as those to which lower rates are applicable in other Member States and under the same conditions. In order to comply with the ceiling of seven points, Member States that were applying such lower rates to supplies of goods or services covered in more than seven points in Annex III to Directive 2006/112/EC on 1 January 2021 should limit the application of reduced rates which are lower than the minimum of 5 % and the granting of exemptions with the right to deduct input VAT to supplies of goods or services covered in seven points in Annex III to Directive 2006/112/EC by 1 January 2032 or by the time of adoption of the definitive arrangements, whichever is the earlier. Those amendments do not affect the arrangements for derogations concerning the application of the exemptions without the right to deduct input VAT set out in Annex X to Directive 2006/112/EC.

(10) Furthermore, a number of other derogations currently allow certain Member States to apply reduced rates not lower than 12 % to goods and services not listed in Annex III to Directive 2006/112/EC. Given the proximity in terms of the level of those reduced rates to the standard rate and in line with the principle of equal treatment, it is appropriate to provide for an option, open to all Member States, to apply reduced rates not lower than 12 % to the same goods and services as those to which reduced rates not lower than 12 % are applied in other Member States and under the same conditions.

(11) Other Member States should be able to apply reduced rates not lower than 12 % on supplies of goods and services not listed in Annex III to Directive 2006/112/EC, and reduced rates lower than 5 % and exemptions with the right to deduct input VAT on supplies of goods and services covered in any points of Annex III to Directive 2006/112/EC other than points (1) to (6) and (10c), as long as they respect the structure of VAT rates provided for in this Directive and the corresponding conditions applied by the Member States with reduced rates or exemptions with the right to deduct input VAT in place on 1 January 2021. Those other Member States should include Member States that currently apply reduced rates and exemptions with the right to deduct input VAT and would like to apply reduced rates not lower than 12 % on supplies of goods and services not listed in Annex III to Directive 2006/112/EC, reduced rates lower than 5 % or exemptions with the right to deduct input VAT on other supplies of goods and services than the ones they currently apply.

(12) Member States that were applying reduced rates or were granting exemptions with the right to deduct input VAT based on derogations on 1 January 2021 should communicate to the VAT Committee the main provisions and conditions of derogations in their national law applied on 1 January 2021 and to which access will be opened to other Member States. In order to ensure legal certainty and enable equal access to those derogations for all Member States, and based on the information provided by the Member States concerned until the set deadline, a full list of the goods and services to which such reduced rates or exemptions are applied is to be prepared and distributed to all Member States by the Commission immediately after receiving that information. Compliance by the Member States with the deadline for communicating such information is essential to

...