UPDATED | Temporary VAT rate reductions in the wake of COVID-19

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Originally published: 1 July 2020 | Last updated: 13 August 2020

Tax authorities continue to take fiscal measures to address the negative economic effects of COVID-19 on vulnerable industry sectors. Temporary VAT reductions have been announced from Austria, Cyprus, Greece, Bulgaria, United Kingdom, and most recently Ireland.

Bulgaria extends use of the reduced VAT Rate

The Bulgarian Parliament has now approved the proposal to extend the application of its VAT measures in response to the Covid 19 pandemic. The 9% reduced VAT will now also apply to the following:

  • Beer and wine supplied as part of restaurant catering services;
  • The use of sports facilities;
  • Tour operators’ services.

We are awaiting further details regarding the Implementation of the legislation along with an effective date for the new changes.

Ireland – Reduces the standard VAT rate

To support its ailing economy due to the COVID-19 crisis, Ireland has announced a temporary VAT reduction from 23% to 21%. The reduced VAT rate will be in use from 1 September 2020 through 28 February 2021.

United Kingdom – Temporarily reduced Tourism and Hospitality VAT rate

UK Tourism and Hospitality are among the hardest hit sectors by the COVID-19 restrictions; the industry employs some 2 million people of whom 1.4 million were furloughed.

With the easing of the restrictions, the UK Chancellor has announced a temporary reduction of VAT from 20% to 5% for the Hospitality and Tourism industries. The reduction will be in force from 15 July until 12 January 2021. Some examples of where the reduction will apply:

  • Hotel and B&B Accommodation
  • Catering, i.e, eat-in and hot takeaway food from café’s, restaurants and pubs
  • Tourist attractions, theme parks, cinemas, etc.

Austria – Temporarily reduced VAT rate

To support the gastronomy, tourism, and cultural sectors, the Austrian government has announced a reduced VAT rate of 5%. This rate will be introduced from 1 July 2020 for supplies of food and beverages in restaurants and other catering establishments; access to museums, cinemas, or musical events and supplies in the publishing sector. The 5% rate will apply from 1 July 2020 to 31 December 2020.

Cyprus – Reduced VAT rate for tourist services

The VAT rate reduction, from 9% to 5%, will be in place between 1 July 2020 through to 10 January 2021 and will apply to restaurants and catering services, hotel accommodation, and transport of passengers. The reduction was decided by the Ministerial Council on 23 June.

Greece – Additional temporary VAT rate reductions for hospitality and tourism

Greece has reduced the VAT rate for coffee and non-alcoholic drinks, passenger transport, and services in cafes, restaurants, hotels, and similar businesses. VAT for these goods and services has been reduced from 24% to 13%. Movie tickets have also had a VAT reduction to 6%.

As a stimulus for the Tourism sector, Tourist packages (all-inclusive accommodation) will also see reductions in the VAT rate. The simplified ratio applied to such packages (80% of package subject to a reduced rate of 13% and 20% of package subject to 24%), has been temporarily changed to 90%/10% (ie. 90% of the package is subject to a reduced rate of 13% VAT and 10% to a standard rate of 24% VAT). All of these VAT reductions will apply from 1 June 2020 until 31 October 2020.

Bulgaria – restaurant – and catering services see a temporary VAT rate reduction

The Parliament of Bulgaria has reduced the VAT rate from 20% to 9% for food provided by restaurants and catering services.  The reduction will apply from July 2020 to December 2020.

All tax rates mentioned in this update are already available in the Tungsten Network systems and our Portal.

In the meantime

While we monitor all the various mandates and changes occurring globally, you can learn more about what these recent trends in the ever-changing compliance landscape mean for global businesses. Watch our Quarterly Compliance Update webinar, where I share insights on the key considerations finance professionals need to consider when analyzing the shifting regulatory landscape.