EU Parliament pushes 200 amendments on VAT and other taxes on banking & insurance
The European Parliament in April 2026 has tabled over 200 amendments to its draft report on a coherent tax framework for the financial sector, with VAT reform emerging as a central theme.
This ranges from fixes to cross-border VAT groupings through to new markets like Crypto, derivatives and neobanking. While views diverge across broader measures such as financial transaction taxes, there is growing alignment that the current VAT treatment of financial services is outdated and distortionary.
The most dramatic suggestion is the consolidation of Insurance Premium Tax, a turnover tax on insurance premiums, into the VAT regime (insurance is exempted from VAT).
There was a call earlier this year from Parliament on Financial Services VAT reforms, and these amendments to for a Parliamentary vote on 26 April 2026.
Narrowing the financial services VAT exemption
A number of amendments focus on narrowing the long-standing VAT exemption for financial services. In particular, there is support for taxing clearly identifiable, fee-based B2B services such as advisory, processing and platform fees. The logic is straightforward: these services are already priced transparently and could be brought into the VAT net without the technical complexity associated with margin-based products.
This would address one of the core structural flaws of the exemption, namely irrecoverable input VAT. Financial institutions today absorb significant VAT costs, which are often embedded into pricing and operational structures, distorting outsourcing and investment decisions.
Fixing fragmentation and reflecting modern finance
Beyond the exemption itself, the proposals highlight wider structural weaknesses. The current VAT framework lacks clarity for newer business models, including neobanks, crypto-assets and decentralised finance. This has resulted in divergent national interpretations, increasing compliance risk and undermining scalability across the Single Market.
There are also calls to expand cross-border VAT grouping and strengthen cost-sharing mechanisms. Existing rules, particularly under Article 11 of the VAT Directive, remain territorially constrained, leaving multinational financial groups exposed to additional VAT leakage and inefficiencies.
A shift towards modernisation
Taken together, the amendments signal a clear direction of travel: modernising VAT rules to reflect digital financial services and cross-border operations. There is also a more radical strand of thinking, including whether insurance premium taxes could ultimately be replaced by a VAT-based model, though this remains exploratory.
Parliament to push European Commission
The proposals will be debated in the Parliament’s ECON committee in April 2026, with a vote expected in May and potential plenary adoption in June. While this is not yet legislation, it increases pressure on the European Commission to finally revisit its stalled reform of financial services VAT.
For financial institutions, this is a file to watch closely. Any move to tax fee-based services or expand grouping rules would have direct implications for pricing models, input VAT recovery and operating structures across the EU.
