European VAT Changes

By Global Tax Weekly

In Europe, on August 29, legislation was signed into law providing for numerous changes to value-added tax rules.

The legislation included the introduction of a mandatory VAT split payment mechanism on certain supplies, whereby when a taxable person acquires goods or services from another taxable person, the portion of the payment to the supplier that is VAT will be deposited separately and automatically to a dedicated account of the seller, in order to satisfy the VAT that is required to be remitted to the tax agency.

Under this mechanism, it was announced, split payments will be mandatory for supplies that are currently subject to the reverse charge mechanism, including:

  • steel;
  • fuel;
  • construction services;
  • European Union emissions trading allowances;
  • automotive parts and accessories;
  • coal and coal products; and
  • electronic machinery and equipment and their parts.

The legislation also includes numerous measures intended to simply VAT rules, including through:

  • the use of the European Union Combined Nomenclature to identify goods for VAT purposes;
  • the use of the latest version of the Polish Classification of Products and Services (PKWiU 2015) to identify services;
  • taxing related groups of goods and services at the same VAT rate; and
  • expanding the scope of the flat rate scheme for farmers.

In addition, the legislation will cut VAT rates on numerous basic items, including:

  • tropical and citrus fruit from eight to five percent;
  • certain bread products from 23 or eight percent to five percent;
  • soups, broths, and homogenized food from eight percent to five percent;
  • mustard, sweet pepper spice, and some processed spices from 23 to eight percent;
  • baby and infant products including baby food, nappies, and car seats from eight to five percent; and
  • adult hygiene products from eight to five percent.

Furthermore, the legislation reduces VAT on e-books from 23 to five percent, and on electronic news from 23 to eight percent.

For more information on this, and other topical international tax matters, please visit:

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