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We need flexibility around VAT rate setting, to take into account lower revenues in periods of recession, and to benefit small businesses, says ACCA


18 Jan 2018


Euro & Finance
Trade & Society

The global accountancy body commends the European Commission’s work on VAT rates, acknowledging the sensitivity of the issue.

ACCA (The Association of Chartered Certified Accountants) acknowledges the publication of the Directive amending Directive 2006/112/EC as regards rates of value added tax, and commends the work of the European Commission in this difficult and complex area.

The new rules unveiled by the European Commission, would allow member states, in addition to a standard VAT rate of minimum 15%, to put in place two separate reduced rates of between 5% and the standard rate chosen by the Member State; one exemption from VAT- or 'zero rate'; and one reduced rate set at between 0% and the reduced rates, while ensuring that Member States do apply a weighted average VAT that exceeds 12%.The current list of goods and services to which reduced rates can be applied would be abolished, and replaced by a new negative list to which no exemption to the standard 15% rate could be applied, thus giving more flexibility to Member States.

Chas Roy-Chowdhury Head of Taxation at ACCA says: “This  may look at first sight as though the Commission has somewhat rowed back on earlier proposals for full freedom to set local rates. However, in the context of the wider changes to the system, it is perhaps more sensible not to create an environment in which too much additional complexity around rates for cross-border traders is allowed to creep in, at least before the other mechanisms in the Definitive Regime package have been given time to bed in and been shown to work effectively. In a dynamic tax environment there needs to be flexibility around the 12% rate, to take into account lower revenues in periods of recession. “

Regarding creating a better tax environment for SMEs,  ACCA also welcomes the new proposals, which, while maintaining  the current VAT exemption thresholds, would introduce additional element to ensure a better level playing field between small business trading domestically and across border.

Chas Roy-Chowdhury explains: “the new 2 million euros revenue threshold under which small businesses would benefit from simplification measures across the EU is very important for SMES ‘s ability to grow, and the new turnover threshold of 100,000 euros, which would allow companies operating in more than one Member State to benefit from the VAT exemption, will certainly support further cross-border trade.

“The extension of local exemption thresholds to non-established SMEs importing into other territories will further help the smallest of cross-border traders, removing a potentially significant barrier to businesses looking to make their first steps into international trade. However, the OSS will have to deal seamlessly with the different national thresholds that will now apply, and businesses will still need to be aware of their obligations when they do reach local registration thresholds”, Chas Roy-Chowdhury adds.

The Commission ‘s proposal also entails that  reduced rates should be applied only to goods sold to consumers, not to products that can be used only as an intermediate input.

Chas Roy-Chowdhury notes: “The new reduced rates will clearly benefit consumers where applied, but Member States will need to consider the extent to which they may interact with Special Schemes in particular sectors. Care must be taken to ensure that something which is a benefit to consumers does not separately create an additional burden or complexity for the businesses who supply them”.

“The ball is now in the camp of Member States, and negotiations may prove complicated, as some are not in favour of the introduction of the definitive VAT regime. ACCA stands ready to take part in the process and share its expertise on the issue”, Chas Roy-Chowdhury concludes.

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For media enquiries, contact:

Cecile Bonino, head of EU Affairs

+32 (0) 2 286 11 37 or

Chas Roy-Chowdhury, head of Taxation

+44(0)7710 707 516 or


About ACCA

ACCA (the Association of Chartered Certified Accountants) is the global body for professional accountants, offering business-relevant, first-choice qualifications to people of application, ability and ambition around the world who seek a rewarding career in accountancy, finance and management.

ACCA supports its 200,000 members and 486,000 students in 180 countries, helping them to develop successful careers in accounting and business, with the skills required by employers. ACCA works through a network of 101 offices and centres and more than 7,200 Approved Employers worldwide, who provide high standards of employee learning and development. Through its public interest remit, ACCA promotes appropriate regulation of accounting and conducts relevant research to ensure accountancy continues to grow in reputation and influence.

ACCA is currently introducing major innovations to its flagship qualification to ensure its members and future members continue to be the most valued, up to date and sought-after accountancy professionals globally.

Founded in 1904, ACCA has consistently held unique core values: opportunity, diversity, innovation, integrity and accountability. More information is here:



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