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EU Finance Ministers decide on regulation to reduce VAT on bicycles and e-bikes

BRUSSELS, Belgium - European Union finance ministers agreed on 7 December to change EU rules so that they can cut the Value Added Tax (VAT) on goods and services linked to fighting climate change and health protection. This includes bicycles.

Initially e-bikes were explicitly excluded in the proposal made by the European Commission in 2018 to introduce more flexibility for Member States to change the VAT rates they apply to different products. However, in the final document adopted by the Finance Ministers, electric bikes are now included. This was announced by Andrej Šircelj, the Slovenian Minister of Finance who chaired the negotiation in the Council of EU finance ministers. Slovenia holds the rotating EU Council presidency until the end of December.

Industry wide lobby After the publication of the proposal, ECF and CONEBI started a joint advocacy effort for electric bicycles to also be incorporated in the list of goods for which reduced rates can be applied by EU Member States, the organizations wrote in a statement published today. This included a joint position paper.

Meanwhile, individual member states like Belgium passed legislation that would establish reduced VAT rates on all types of bicycles as soon as the EU VAT framework would allow for it and supported the bicycle sector’s demands at the European level. ECF and CONEBI are now calling upon member states to make use of this new possibility and apply reduced rates across Europe.

VAT landscape The current European VAT rules date from nearly 30 years ago. The Commission proposed to reform them in 2018. Tax rules are usually slow to advance through EU institutions as EU legislation in tax matters requires the unanimous agreement by all EU member states, making every government a potential veto player.

The EU’s standard minimum VAT rate on all goods and services stays at 15%, except for a list of exemptions where the reduced VAT rate must be at least 5%. Actual tax rates applied vary between EU countries and between products. The European VAT landscape is a patchwork because some member states were given exemptions upon their accession to the EU. The agreement of the finance ministers does not abolish this patchwork entirely. Member states can still keep their special VAT rates as long as they do not jeopardise the goals of the European Green Deal. However, a new ‘equal treatment’ clause makes these exemptions available to all member states.

ECF, CONEBI and CIE welcome revision of EU VAT rates “The inclusion of supply, rental and repair of both conventional and electric bicycles in the list of goods on which reduced VAT rates can be applied adds a powerful instrument to member states’ toolboxes for promoting cycling and can help to make cycling even more affordable for citizens,” ECF’s CEO Jill Warren stated.

CONEBI’s General Manager Manuel Marsilio added: “It has been a long way since we started such an important advocacy campaign with ECF in 2018, but we finally see a tangible outcome. This legislative decision, within the reform of the VAT rates, opens up to a unique opportunity for governments in Europe to further support Cycling in very practical terms.”

“This result shows once again the importance of long-term, well resourced, professional advocacy for the cycling sector at national and EU level,” says CIE’s CEO Kevin Mayne. “The work can be slow and highly technical, but the impact is potentially huge.”

European Parliament The lower rates will become possible once the European Parliament is consulted on the agreement, which could take until March 2022.

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