Brussels, 01/03/2000 (Agence Europe) - The EU Council has adopted the decision reducing VAT on "labour intensive" services. The Member States who so wish are authorised to apply a reduced VAT rate, for a period of three years, on two or three categorise of service among those listed here: 1, small repairs to bicycles, shoes, leather goods, clothes and home washing, 2. The restoration and repairs to private dwellings, 3. The cleaning of windows and private dwellings, 4. Home care services, 5. Hairdressers.
Approved last October 8 by the Economic and Financial Affairs Council, this proposal was still the object of a review by the British Parliament. From the 1 January 2000, the States involved where still authorised to enforce the decision, in anticipation of its entry into force. Nine Member states took part in the experiment: Belgium, Spain, France, Greece, Italy, Luxembourg, Portugal, the Netherlands and the United Kingdom (the latter only with regard to repairs to private dwellings on the Isle of Man, for further details see EUROPE of 23 December, p. 6). Before the 1st October 2002, they will present an impact assessment of this measure on job creation and "moonlighting." In relation to the results gathered, the European Commission will be able to decide whether or not it will make this regime permanent.
Derogations from general VAT system for Germany, Austria and Portugal
To gather together all the derogations over this proposal, which should be unanimously approved by the Council, the European Commission undertook, on 8 October, to allow Germany, Austria and Portugal certain derogations, over Community legislation on VAT (6th VAT Directive).
On Monday the Ecofin Council adopted the derogations relating to Germany. They aim to restrain, from those subject to VAT, the right to deducting VAT for their car expenses. When the car is not solely used for business purposes, this right to deduction will be applied through a fixed rate, set at 50% of the total expenses incurred. Germany will also be able to exclude from the right to deduction the goods and services used solely as accessories (10% of their total use) for business purposes. It justifies these derogations (authorised retroactively from the 1st April 1999 to 31 December 2002) through a desire to simplify its VAT legislation and also to avoid fraudulent behaviour. Several Member States already enforce this type of fixed rate, or even to exclude certain rights to deductions for car expenses.
The European Commission also made proposals for changes to the VAT legislation requested by Austria and Portugal. For Austria, it concerns the ability to continue applying a reduced rate of 10% to the residential letting of buildings, authorisation that it received during its accession to the EU in 1995, but only until 31 December 1998. Portugal will be authorised to keep its reduced VAT rate of 12% on restaurant services (a reduced rate that it ended in 1992 and restored in 1996). As opposed to what happened with the derogation for Germany, the European Parliament must be consulted over the proposals. On Tuesday the Parliament's Economic and Monetary Committee gave a favourable opinion and the dossier will be examined in plenary during the March session in Strasbourg. "These derogations will then be adopted by the Council without debate, as an political approval was already be given last October", indicated a European Commission civil servant.