VAT & Indirect Tax Intelligence
VAT news digest
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The Tanzanian government announced a VAT exemption for the construction of affordable houses costing up to 50 million Tanzanian shillings. The measure aims to attract local and foreign investment and increase private sector participation in housing development. The exemption applies to any housing project within the specified cost limit.
Today's VAT news highlights key developments in Europe, Africa, and the Middle East, including updated regulations on VAT for food supplements and VAT group members in the EU. Additionally, changes to VAT refunds and e-invoicing systems are being implemented in various regions, such as the UAE and France. These developments have significant implications for businesses and individuals, with potential impacts on costs and compliance requirements.
Today's VAT news is dominated by significant developments in Europe, including a key court ruling on fixed establishments and updates on mandatory online registration for tax advisors. Additionally, various countries are introducing VAT reforms, such as temporary reduced rates for certain goods and services, and broader tax system overhauls. These changes are also being examined in the context of the latest research findings, including the Billentis 2026 Key Report.
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Finland’s 2026 VAT regime includes a new reduced rate of 13.5% for foodstuffs, animal feed and certain agricultural products, effective January 2026. Finnish businesses must register for VAT when turnover exceeds €15,000, while non‑resident firms must register on any taxable sales with no threshold. EU B2C distance sellers face a €10,000 cross‑border sales threshold that triggers Finnish VAT registration or OSS use, and the reverse charge mechanism allows foreign suppliers to avoid registration if all sales are B2B reverse charge.
A proposed permanent reduction of the UK hospitality VAT rate from 20% to 10% would cost an estimated £12‑14 bn per year, with the bulk of the benefit accruing to large chains such as McDonald’s. The analysis argues the cut is mis‑targeted, unlikely to lower prices, and would create incentives for businesses to re‑characterise activities to qualify for the lower rate. It suggests alternative measures—such as business‑rate reform or NIC relief—would better support the sector.
The Bailiwick Express reader letter argues that Guernsey’s proposed 3% GST will not deliver the projected £55m revenue, instead yielding a net income of only about £12.3m after costs. It highlights one‑off implementation costs of £40.9m, ongoing annual costs of £30.7m, and a £30m increase in the States Superannuation Fund liability, concluding that the claimed £50m funding gap is negligible.
Italy’s mandatory B2B e‑invoicing via the SDI platform has exposed high first‑pass rejection rates driven by master‑data errors, highlighting the need for a tax engine to ensure real‑time compliance. The article quantifies savings of €37 per invoice and a drop in rejection rates to about 5% when a tax engine is used. It underscores that even mature markets like Italy still face significant data quality challenges that a tax engine can address.
The Netherlands has made the Digital Dossier system mandatory for all customs declarations effective 16 May 2026. Paper‑based and email submissions are no longer accepted; businesses must ensure their systems are fully aligned and integrated with the Dutch Customs DMS. The change aims to streamline customs processing and reduce manual handling.
The General Court’s judgment in case T‑444/25, delivered on 10 June 2026, clarifies that within a VAT group, exemption eligibility under Article 132(1)(b) and (g) of the VAT Directive must be met by the specific entity supplying the service, not by the group as a whole. The ruling confirms that a VAT group cannot automatically extend healthcare or social‑welfare exemptions to non‑recognised members. The decision, based on a Dutch VAT group, applies across the EU and requires careful review of group structures for exempt activities.
The UK Government will temporarily reduce VAT on children’s meals and outings to 5% from 25 June 2026 to 1 September 2026, cutting the standard rate of 20%. The scheme covers children’s menu meals in restaurants, tickets for theatres, cinemas, soft play, adventure centres and theme parks. Businesses should review the GOV.UK guidance for eligibility and compliance.
Bangladesh’s government has proposed a comprehensive VAT exemption package for startups, content creators and freelancers in the 2026‑27 national budget. The package includes a 15% VAT exemption on services provided by freelancers and content creators, full local VAT exemption for startups, and 15% VAT exemption on imported services and office rentals, with the measures set to remain in force until 30 June 2035.
The article explains how contract and toll manufacturing arrangements are treated under EU VAT law, highlighting the importance of economic reality in determining whether the supply is of goods or services. It outlines the reverse charge mechanism for toll manufacturing, the French four-part test, and the risk of creating a Fixed Establishment that triggers local VAT registration and reporting obligations.
The article explains how VAT on food supplements varies across EU member states, highlighting Germany’s split between solid (7%) and liquid (19%) rates and Sweden’s temporary 6% rate until 2027. It stresses the importance of correct Combined Nomenclature classification to apply the right rate and warns that misclassification can trigger back payments and fines.
An EU court has ruled that grouped companies, even when treated as a single entity for VAT payments, must be considered separately when determining eligibility for certain VAT exemptions. The decision clarifies that VAT group members cannot rely on a collective status to claim exemptions, affecting how VAT groups assess exemption eligibility across the EU.
Kenya’s Finance Bill 2026 proposes a VAT exemption for certain mobile phones, cutting the effective tax burden on imported devices from about 55% to 50%. The exemption would give imported phones a price advantage while local assemblers would lose the ability to recover VAT on inputs, raising their production costs and potentially making Kenyan‑assembled phones more expensive.
The Federal Tax Authority (FTA) has announced a new initiative that broadens the range of construction costs eligible for VAT refunds for UAE nationals building new homes. Effective 1 January 2026, citizens can claim refunds on a variety of items—including staff quarters, home gyms, smart security systems, and complete reconstruction projects—provided they meet all conditions and documentation requirements. The digital VAT refund platform has been updated to reflect these new categories.
