Brussels, 08/11/2006 (Agence Europe) - On Tuesday 7 November, the ECOFIN Council adopted without debate a decision authorising seventeen Member States to apply cut-rate VAT. Applicable from January 2006 until 31 December 2010, the decision implements Directive 2006/18/EC amending Directive 77/338/EEC on the common VAT system and ends a tax conundrum that arose earlier this year and almost led the EU to a legal vacuum because of the unanimous decision-making requirement for VAT matters (see EUROPE 9123).
The decision endorses the European Commission's proposal of July 2006 (see EUROPE 9239), allowing cut-rate VAT to be levied on the following labour-intensive services: 1) the repair of bicycles, shoes, leather goods, clothing and household linen for Belgium, Finland, Greece, Hungary, Luxembourg, Malta, the Netherlands and Poland; 2) renovating private housing but not for materials making up a high proportion of the value of the service provided. This will apply in Belgium (housing finished at least five years ago), Cyprus, Spain (only for masonry), France (housing finished at least 2 years ago), Greece, Hungary, Italy, Latvia, the Czech Republic, the Netherlands (painting and plastering of housing finished at least fifteen years ago), Poland, Portugal, Slovenia, the United Kingdom (only in the Isle of Man); 3) hairdressing for Cyprus, Spain, Finland, Latvia, Luxembourg, the Netherlands and Poland; 4) window cleaning and cleaning private housing in France, Luxembourg and the Czech Republic; 5) home help for France, Greece, Hungary, Italy, Malta, Portugal and the Czech Republic.
On Tuesday, France announced it wants to levy cut-rate VAT on online media (see EUROPE 9299) but Denmark and Sweden objected that it was very difficult to set limits to online media and the internet is an important source of tax revenue. EU Taxation Commissioner László Kovács said that the Commission would be looking at the question in the report to be published in June 2007 on the impact of cut-rate VAT on the common market. (mb)