EU agreement referring to the VAT exemption and lower VAT rates

The European Union has updated the list of goods and services for which reduced VAT rates are allowed, taking into account the digital transformation of the economy. The compromise emphasizes the equal treatment of all EU member states.  

As from 2025, the EU countries including Poland will be able to exempt from the VAT the supply of food, water, medicines, medical equipment, books and magazines for the libraries, passenger transport and supply and installation of solar panels.  It is result of the agreement between the parties in ECOFIN. 

Regardless of this, the reduced VAT rate (not lower than 5%), will be applicable to a maximum of 24 categories of goods and services listed in the amended Annex 3 to the VAT Directive. These will be :  supply of electricity, children’s clothes, legal services provided for employees and the unemployed in employment matters, admission to the theaters, concerts and sports events (also in electronic form), reception of radio and television (also via the Internet), delivery, the construction, renovation and conversion of buildings as part of social policy, the supply of goods and the provision of services used in agricultural production. 

New provisions have been added to the VAT Directive also to allow Member States to react quickly to exceptional circumstances such as pandemics, humanitarian crises or natural disasters. 

Currently, Poland is facing an increasingly growing inflation. The introduction of the lower VAT rates and exempt from the VAT for the above goods is aimed also to impact the inflation effects. The lower VAT rates would lower rising the prices for the specific goods.  

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