Est. 2min 29-11-2007 (updated: 28-05-2012 ) kovacs2.jpg Euractiv is part of the Trust Project >>> Languages: Français | DeutschPrint Email Facebook X LinkedIn WhatsApp Telegram Banks and insurance companies are likely to benefit from large savings thanks to new VAT rules proposed by the Commission on 28 November. Member states will fear a loss in tax revenue, but the Commission argues that “overall efficiency gains will compensate for limited revenue losses”. Commissioner Kovacs expects all consumers of financial and insurance services to benefit from the new rules. The Commission proposed, on 28 November, to amend existing VAT rules by clarifying exemption schemes for financial services and insurance, but member states have yet to agree to the highly sensitive proposal. “Leaving things as they are is not an option. I am convinced that the balanced package of measures being proposed is the best option for VAT reform in the financial and insurance sectors,” Taxation Commissioner Laszlo Kovacs said on 28 November 2007. The proposal’s key measures include: Increased legal certainty for businesses and member states through clarifying and updating definitions of the exempt services; Giving banking and insurance companies the option to tax their services if they wish to do so, and in return allow them to deduct VAT paid for supply services or goods, and; The introduction of an industry-specific exemption from VAT on cost-sharing arrangements on purchases, for example IT systems – including cross border operations. Read more with Euractiv Denmark to hold second euro referendumFollowing the re-election of Anders Fogh Rasmussen for a third term as Danish prime minister, Danes are set to vote on their country's opt-out from a number of EU policies and, most notably, the adoption of the euro, which was dismissed in a 2000 referendum. Subscribe now to our newsletter EU Elections Decoded Email Address * Politics Newsletters Positions Guido Ravoet, Secretary General of the European Banking Federation (EBF), said the proposal was a "first step in the right direction", but also added that the proposal should "go further in modernising the legislation in order to correctly address today's banking activities and be flexible enough to include new activities as they develop." Michaela Koller of the European insurance and reinsurance industry organisation CEA said: "European insurers welcome the Commission's intention to provide financial and insurance services operators with increased legal certainty on the scope of the VAT exemptions and [...] reduce the negative impact of non-deductible VAT on the costs of exempt operators." BackgroundFinancial services and insurance companies have generally been exempt from Value Added Tax (VAT) since 1977. However, because of the exemption, banks and insurance firms cannot recover VAT on their purchases of services or goods. This results in "hidden" VAT charges for supplies, such as office equipment or services that have been outsourced, which financial services or insurance companies need to run their businesses. Moreover, the existing rules have not been uniformly applied across EU member states. According to the Commission, the growing number of cases before the European Court of Justice (ECJ) in recent years shows that there is a need to update the existing rules and adapt them to current market developments. Timeline Member states must agree on the proposal unanimously after consultation with Parliament. Further ReadingEU official documents Commission:VAT: The European Commission proposes to modernise the current legislation for financial services and insurances(28 November 2007) [FR] [FR] [DE] Commission:Modernising VAT rules applied on financial and insurance services – Frequently Asked Questions(28 November 2007) Business & Industry European Banking Federation (EBF):Banks welcome the Revision of the VAT Regime(28 November 2007) Press articles Reuters:EU executive proposes VAT change for finance firms(28 November 2007) Neue Zürcher Zeitung:EU will Mehrwertsteuer für Banken neu regeln(28 November 2007)
