Pasquale Della Corte
by Pasquale Della Corte
Directive 2022/542 of 05 April 2022 amended Directives 2006/112/EC and (EU) 2020/285, regarding VAT rates.
EU member states shall apply the new regulation from 01 January 2025.
The main objective of this directive is to update the list of goods and services eligible for reduced taxation rates, and establish grounds for ensuring that member states have equal access to applying reduced rates. These reduced rates should, however, remain an exception to the standard rate.
In particular, the Directive provides that member states can apply to the goods and services tax reduction options as shown in the amended Annex III:
A maximum of two reduced rates of a minimum of 5 percent (maximum 24 points of the Annex); and
A reduced rate lower than the minimum of 5 percent, and an exemption with deductibility of the VAT paid at the preceding stage, to supplies of goods or services (maximum 7 points of the Annex).
The Directive considers that 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 public’s general interest (e.g. healthcare, environmental impact, etc.).
Furthermore, the Directive, with regard to the neutrality principle, ensures the same treatment in terms of VAT rates for renting or leasing, and the supply of certain goods.
With regard to existing derogations, in line with the principle of equal treatment, all EU member states may 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.
Moreover, effective 01 January 2021, member states that apply derogations (with respect to reduced rates and exemptions with the right to deduct input VAT not compliant with this new system) have to limit this situation by 01 January 2032.
In compliance with this new system, in July 2022 Italy introduced a VAT rate of 10 percent for certain services provided by healthcare institutions which are not VAT exempt.
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Pasquale Della Corte is a chartered accountant and has about ten years of experience in VAT and international tax advising foreign companies with subsidiaries and branches Italy. He is also member of the Study Commission for non-profit institutions of the Institute of Chartered Accountants of Rome. Contact Pasquale.