On January 18th, 2018, the Commission proposed two directives aimed at giving Member States more flexibility in setting VAT rates and simplifying the rules for small businesses.
With regard to the VAT rates, the Commission proposes that the standard rate should be definitively fixed at a minimum level of 15% and that Member States may apply a maximum of two reduced rates fixed at 5% minimum.
However, it would be possible to apply a reduced rate (below 5%) and a VAT exemption with recovery right if the VAT average rate of the Member State is higher than 10%.
A negative list of supplies of goods and services for which no reduced rate could be applied should be established, with a review every 5 years.
In addition, special rules for small enterprises should be amended, notably as regards the franchise regime. Finally, several obligations for small businesses should be simplified, in particular concerning accounting and VAT returns.