EU Commission Proposes Two Year Extension To VAT Experiment
By by Ulrika Lomas, Tax-News.com, Brussels
15 December 2003

The European Commission has proposed a two year extension to the reduced rate of VAT applied to certain labour-intensive services, which was introduced on an experimental basis in nine member states in January 2000.

The Directive 1999/85/EC initially allowed the member states in question to apply these reduced rates for a period of two years until December 31 2002 (later extended to 2003), in order to test the impact it would have on job creation and combating the black market.

However, the Commission has proposed a further two-year extension to the experiment, as the member states concerned have yet to agree on permanent proposals advanced by the executive in July 2003 for a long term regime of reduced rates to apply throughout the Union.

The list of categories to which Member States were authorised to apply the reduced rates were:

- The repairing of: bicycles; shoes and leather goods; clothing and household linen (including mending and alteration);

- Renovation and repairing of private dwellings, excluding materials which form a significant part of the value of the supply;

- Window cleaning and cleaning in private households;

- Domestic care services (e.g. home help and care of the young, elderly, sick or disabled);

- Hairdressing.

Member States could request to apply reduced rates to two (or in exceptional circumstances three) of the five categories. In the event, nine Member States (Belgium, Greece, Spain, France, Italy, Luxembourg, the Netherlands, Portugal and the United Kingdom) requested authorisation to carry out this experiment, and submitted applications concerning the sectors from the above list to which they wanted to apply the reduced VAT rate.

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