July 25, 2022
A 2020 action plan adopted by the European Commission (EC) was aimed at fighting tax abuse, creating a more flexible taxation system, and reducing administrative obligations for individuals and businesses. Among the measures in the action plan were an update of the VAT for the financial sector (banking, insurance, etc.) and the decision to lift the VAT exemptions for companies in the sector.
The preparation for this step took place in the spring of 2021, when the EC held public consultations. During the talks, the EC collected opinions on the existing VAT regime for financial companies.
However, the changes in the VAT regulation are taking a while, with the following amendments of the directive planned for 2023. It is guessed that VAT will be applicable for companies in the financial sector when fee-based services are sources, continuing to exclude credit service providers from VAT.
Together with the decisions on the mentioned areas, the EU will unveil its VAT regulatory direction for fintech, payment service, electronic money providers, and cryptocurrency companies.
Among possible outcomes are a general rate, a reduced rate, a reduced rate for investment service providers, or cost-sharing agreements. In addition, all scenarios have planned a possibility for a fixed deduction.
Do the changes in the VAT regulation impact your company? Get in touch, and we will help you navigate the tax aspects of your business.