From 1 January 2025 member states can apply four reduced tax rates, there will be a tax rate below 5 percent and a tax rate of 0 %. However, the applicability of the reduced tax rate for certain products ceases. In addition, for online services the place of performance will be the place where the person using the service is established, has a permanent residence or usual residence if the person is not a taxpayer. If the person using the service is a taxpayer, the place of performance is determined by the location of the service provider.

Based on the amendment to the VAT Directive, the member states may apply four reduced tax rates in the future, in addition to the two reduced tax rates of 5 percent and 18 percent [(and the normal tax rate (between 27 in our country)], there will be a tax rate below 5 percent but above 0 percent, and a 0 percent tax rate may also come into effect.

For example, the following products may be subject to a reduced tax rate:

  • passenger transportation and the transportation of objects accompanying passengers, such as luggage, bicycles, including electric bicycles, or automobiles or other vehicles, or the provision of services related to passenger transportation;
  • admission tickets to performances, theaters, circuses or fairs, amusement parks, concerts, museums, zoos, cinemas, exhibitions or other cultural events and facilities, and live online streaming of such event or visit, or both;
  • provision of repair services for household appliances, shoes and leather goods, clothing and household textiles (including minor repairs and alterations);
  • hairdressing salon.

However, the list is much longer than this, the member states can choose seven of them to which the reduced tax rate is applied.

It will also be necessary to pay attention to the fact that the reduced tax rate for natural gas from 2025, firewood from 2030, and chemical plant protection agents and chemical fertilizers from 2032 will cease to exist.

Furthermore, the place of performance rules for cultural, artistic, sports, scientific, educational, entertainment or similar events provided virtually are changing.

According to the current rules, the place of performance of services related to entry to cultural, artistic, sports, scientific, educational, entertainment or similar events, such as fairs and exhibitions, as well as additional services related to entry, provide to a taxpayer, is the place where the above events actually take place. The place of performance of services related to cultural, artistic, sports, scientific, educational, entertainment or similar activities, such as fairs or exhibitions, provided to non-taxable persons, including the provision of services by the organizers of such activities, as well as the provision of additional services related is the place where these activities are actually carried out.

As you can see, the current rules do not differentiate between services provided virtually or at the location of the event. The new rules, which will be in force from 1 January 2025, however, distinguish between the two types of services.

In the case of virtual entertainment services provided to non-taxable persons, the VAT Directive is therefore supplemented by the fact that if the services and additional services are related to events that are broadcast through online streaming or other virtual solutions, the place of performance is the place where the non-taxable person using the service established or has his/her permanent residence or usual residence.

In the case of a taxpayer the place of performance is determined by the location of the service provider.

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