The European Commission releases its proposal for VAT reform

The European Commission releases its proposal for VAT reform

As announced on its 2016 VAT action Plan, the European Commission published a proposal to review the Value Added Tax (VAT) Directive.

The objectives of this proposal are both to offer more flexibility to Member States as well as to establish a uniform structure in which Members States can set their own VAT rates.

The Commission’s proposal could have a strong impact on the VAT rates system as the rules will evolve from a pre-defined list of goods and services, for which reduced rates or VAT exemptions were allowed (current system), to a new list of products, in which the standard rate of minimum 15% must always be applied. In addition, the European Commission announced that the proposed definitive regime will be based on taxation taking into account the countries of destination instead of the country of origin as initially envisaged.

This proposal might also have consequences for sport activities. Indeed, within the current system, the following activities are covered by the list of potential exemptions or reduced rate:

  • Exemptions regarding “services closely linked to sport or physical education provided by non-profit-making organisations”.
  • Reduced rates: “Admission to sporting events" and the "use of sporting facilities”. Despite the statement of the Commission that “all goods currently enjoying rates different from the standard rate can continue to do so”, the decision of maintaining these exemptions will belong to Member States, at the national level.
  • In that perspective, the challenge for national sport organisations will be to convince their government regarding the necessity to keep supporting their actions via taxations reductions or exemptions.

On the other side, these new rules could also represent a real opportunity to increase the support given to sport activities, by diversifying the areas covered by reduced VAT rates. Furthermore, another aspect that could have an impact on sport is the inclusion, in the new proposed list of “Supply of gambling and betting services”.

This legislative proposal will now be submitted to the European Parliament and to the Council for adoption. The EOC EU Office will closely follow the process and share the Sport movement’s position with all relevant EU officials.

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