How do the proposed VAT reforms impact on institutional philanthropy?

At the beginning of the year, the European Commission developed a proposal to reform the VAT system by introducing more flexibility for Member States to change the VAT rates. It will now be crucial to review and comment on these suggested amendments as they will affect charities and institutional philanthropy. EFC and Dafne will engage around the VAT reforms and their impact on institutional philanthropy.

In January, Hanna Surmatz of EFC was appointed the new Chair, and Max von Abendroth from Dafne deputy chair, of the European Charities’ Committee on VAT (ECCVAT) taking over from John Hemming of the Wellcome Trust. ECCVAT’s objective is to fight for a fairer and simpler VAT system for charities, who lose millions on irrevocable VAT costs. ECCVAT will now clarify open questions related to the VAT reform with the European Commission and comment within the 18 March deadline on the suggested amendments.

Current conditions of the VAT reform:

At the moment, VAT rules allow for two distinct categories of products to benefit from a reduced VAT rate as low as 5% in each country. A number of Member States also apply specific derogations for further reduced rates. The new newly proposed rules will enable all Member States, in addition to the two reduced rates of a minimum of 5% and one 0% rate, to apply a third reduced rate of between 0% and 5%. The proposal suggests that the current list of goods and services to which reduced rates can be applied will be abolished. Instead a new list of products is envisaged to which the standard rate of minimum 15% must always be applied. This list will include products such as weapons, alcoholic beverages, gambling and tobacco. Member States must also ensure that the weighted average of all VAT rates applied is at least 12%.

EFC members who would like more information regarding this can contact Hanna Surmatz at hsurmatz@efc.be.

You can also check the EC website or download the following PDF: Proposal on VAT tax rates