Portuguese | New directive on VAT rates


The directive modernizes the rules of the VAT Directive on applicable rates, aiming at greater flexibility for Member States in the application of reduced rates.

The main objectives of this directive are the harmonization of the VAT rates applicable by the Member States, the modernization of the categories of products considered to cover essential needs, the general interest and the benefit of the end consumer.


The Directive maintains the general rule that Member States may not apply a VAT rate lower than 15%. However, as regards reduced rates, until now Member States could apply up to two reduced rates to goods and services listed in Annex III of the VAT Directive. This directive establishes that from now on, Member States can set reduced rates under the following conditions:

• Member States may apply two reduced rates, not lower than 5%, to a maximum of 24 categories of goods and services listed in Annex III;

• Member States may also, in addition to the two reduced rates mentioned above, apply a reduced rate of less than 5% as well as an exemption with the right to deduct (“zero rate”) up to 7 of certain categories of goods and services listed in Annex III and identified by the Directive.

Following the VAT Action Plan: Towards a single VAT in the EU and reflecting new priorities at EU level on health, environment and digital transition, the new Directive on VAT rates was approved on March 29, 2022 with the aim of modernizing and harmonizing VAT rates.


The Directive establishes that Member States may apply reduced rates of at least 12% to goods and services not listed in Annex III but which are subject to reduced rates by other Member States as a derogation from the Directive VAT, in order to avoid distortions of competition.


As part of the European Union’s EU4HEALTH program and the European Green Deal plan, the directive also plans to phase out the applicability of reduced VAT rates and exemptions to fossil fuels and products with similar effects on carbon emissions. gas, as well as chemical fertilizers and pesticides.


The directive provides for new categories of goods and services to which reduced rates can be applied. The amendments aim to modernize the list in line with current EU priorities: health and the environment.

The new list in Annex III of the VAT Directive adds the following categories of goods and services:

▪ pharmaceutical products for medical and veterinary use;

▪ medical equipment and protective equipment;

▪ transport of passengers and accompanying goods (including the provision of services relating to the transport of passengers);

▪ supply of books, newspapers and periodicals in physical or electronic form;

▪ admission to cultural performances and events (taking place in physical facilities or via live streaming);

▪ reception of radio and television broadcasting and webcasting services; Internet access services provided under the digitization policy;

▪ supply and construction of housing; renovation and alteration of dwellings and private dwellings; rental of real estate for residential use;

▪ the construction and renovation of public and other buildings used in the public interest;

▪ the supply and installation of solar panels on private homes, public buildings or public utilities;

▪ goods and services normally used in agricultural production, excluding capital goods;

▪ live equines and the provision of services related to live equines;

▪ admission to sporting events or access to live streaming; use of sports facilities and provision of sports or physical exercise lessons also in the event of live broadcasting;

▪ services provided in the context of sanitation, street cleaning, garbage collection and waste treatment or waste recycling;

▪ provision of repair services for household appliances, footwear and leather goods, clothing and household linen;

▪ hairstyle;

▪ energy supply through low-emission systems;

▪ live plants and other floriculture products, including bulbs, cotton, roots and the like, cut flowers and ornamental foliage;

▪ children’s clothing and footwear; provision of car seats for children;

▪ the supply of bicycles, including electric bicycles and rental and repair services;

▪ supply of works of art, collectibles and antiques;

▪ legal services provided to persons under employment contracts and to unemployed persons in industrial tribunal proceedings;

▪ tools and equipment intended for emergency or first aid services provided to public bodies or non-profit organisations;

▪ provision of services related to the operation of lightships, lighthouses or other aids to navigation and rescue services.


The directive entered into force on April 5, 2022 and must be adopted by Member States until December 31, 2024 and will apply from January 1, 2025.

James C. Tibbs