COVID-19 Drives VAT Changes

Back in March, during the early days of the COVID-19 pandemic, the EU’s European Commission recommended that member states offer a VAT holiday. The intention was to pass along savings to customers, with the expectation that the move would spur sales, as well as provide relief to taxpayers.

With Europe slowly reopening to commerce, it’s important for businesses to understand the changes that have taken place over the past quarter.

Ireland

While Ireland made a number of changes that impact Irish companies, they are considering one change that would impact foreign- based businesses. The ruling coalition party is considering a measure to reduce VAT in the tourism and hospitality sectors from 13.5% to 9%. If implemented, this will result in 4.5% savings for companies that travel to Ireland for business.

Germany

The finance ministry issued a temporary VAT reduction from 19% to 16%, effective July 1 through the end of the year. The reduced VAT rate was also lowered from 7% to 5%. Restaurants, cafes and catering services saw VAT reduced from 7% to 5% as well, covering July 1, 2020 through June 30, 2021. These rates are effective from the date of the supply, rather than typical time frame which is the earliest date between the invoice date/payment date/supply date.

Czech Republic

The Czech government announced a reduction that will benefit foreign businesses. On May 26 it proposed to reduce VAT on accommodations, as well as on sporting and cultural events, from 15% down to 10%. Pending government final approval.

Belgium

Effective June 8 through December 31, 2020, Belgium announced it reduced VAT on restaurant and catering services, with the exception of alcoholic beverages, from 12% to 6%. Additionally, the country announced that business entertaining services are fully tax deductible.

Austria

The Bundesminiterium Finanzen Ministry of Finance (BMF) reduced VAT on non-alcoholic beverages to 10% on May 11. On June 12 the BMF announced an additional VAT cut, reducing the VAT on restaurants to 5%.

Bulgaria

Bulgarian tax authorities announced a reduction on catering, café and restaurant VAT, lowering it from 20% to 9%. These VAT reductions are valid through December 31, 2020.

Back to Business

It may be some time before we feel business as usual. However, for those businesses that take advantage of Europe’s open borders, the reduced VAT fees are an encouraging sign that European governments will do what it takes to get business back on track.

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