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VAT: Commission decides to propose two-year extension of reduced rates on labour-intensive services

European Commission - IP/03/1693   10/12/2003

Other available languages: FR DE DA ES NL IT SV PT FI EL

IP/03/1693

Brussels, 10th December 2003

VAT: Commission decides to propose two-year extension of reduced rates on labour-intensive services

The European Commission has decided to propose to allow nine Member States to continue to apply for an additional two years (i.e. until 31 December 2005) the reduced rates of Value Added Tax (VAT) they currently apply to specified labour-intensive services such as renovation of private dwellings, hairdressing, window-cleaning and small repairs. Directive 1999/85/EC allowed those Member States that so chose (see IP/99/1002) to apply a reduction of VAT on these services for an experimental period from 1 January 2000 to 31 December 2002 (later extended to end 2003), in order to test the impact of such a reduction in terms of job creation and of combating the black economy. In response to requests from the EU's Council of Ministers and the European Parliament, the Commission has now decided to propose a further extension for two years because Member States have not so far agreed on the Commission's July 2003 proposal rationalise and simplify the overall rules for reduced rates of VAT (see IP/03/1024). The actual proposal to extend the labour intensive services reduced rates will be presented very shortly.

Directive 1999/85/EC allowed the application of a reduced VAT rate to certain specified labour-intensive services, but for an experimental period of three years only so as to test its impact, in terms of job creation and of combating the black economy.

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. These applications were the subject of a Council Decision 2000/185/EC of 28th February 2000.

Further details concerning reduced VAT rates for labour-intensive services are available on the Europa website:

http://ec.europa.eu/taxation_customs/taxation/labour_intensive/labour_intensive_en.htm


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