2025: Small company VAT thresholds; online events VAT rules; and VAT rate freedoms
The 27 member states of the European Union are expected to implement three major changes to their VAT rules by 1 January 2025. These exclude the proposed EU VAT in the Digital Age reforms, which includes some changes for 2025, but now likely to be delayed until 2026.
The three changes are provided below. Some member states have already implemented the changes.
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Common VAT registration threshold option
EU states have agreed for member states to extend the same VAT registration thresholds enjoyed by domestic businesses to EU taxpayers from other member states (non-resident). The aim is to encourage EU businesses to trade within the Single Market by cutting the costs and paperwork of VAT until their trade takes off. There will now be a single higher VAT threshold which businesses may sell goods below without having to VAT register if required.
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Place of supply rules on cross-border online live events
The EU is updating the Value Added Tax rules for determining in which country VAT is due – ‘place of supply’ – on entrance fees for virtual events. Member states are required to transpose the new obligations by 1 January 2025. This was concluded by the Council of the European Union on 6th April 2022. The main change relates to the place of supply for digital live events for B2C where non-tax paying attendees are in a different EU state. The place of supply will switch from the country of the host to the country where the attendee is domiciled.
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Reduced VAT rate setting freedoms
Since April 2022, member states have been given the option for more reduced VAT rates with the legislative process to be completed by the start of 2025. The EU VAT Directive has been amended to provide member states wider rights to use reduced VAT rates, including an option to introduce a new rate below 5% on a limited range of supplies. States can apply a new reduced rate below 5% to up to 7 of a list of 24 categories of products and services. They could then also apply reduced rates of 5% or above to the remaining 24 categories of the same list. Many states have already adopted the new freedoms and have been introducing a wider range of rates.
