EU consumers to benefit from reduced VAT rates on bikes and e-bikes

The Council of the EU has reached an agreement on updated rules for VAT rates, with member states now able to apply reduced VAT rates on the supply, rental and repair of bicycles, including e-bikes.

The new rules reflect member states’ current needs and the EU’s present policy objectives, said the Council, which have changed since the old rules were put in place. The updates ensure member states are treated equally and give them more flexibility to apply reduced and zero VAT rates. The rules will also phase out preferential treatments for environmentally harmful goods.

The Council updated and modernised the list of goods and services for which reduced VAT rates are allowed (Annex III of the VAT directive), taking into account the digital transformation of the economy. The update of the list was driven by a number of principles, such as the benefit of the final consumer and the general interest. However, to prevent a proliferation of reduced rates, the Council decided to limit the number of items to which reduced rates could be applied.

The European Cyclists’ Federation (ECF), the Confederation of the European Bicycle Industry (CONEBI) and Cycling Industries Europe (CIE) have welcomed this step, which has the potential to make bicycles and e-bikes more affordable for consumers around Europe and further boost the European cycling boom.

In early 2018, the European Commission published a reform proposal for VAT rates where conventional bicycles and electric cars, but not e-bikes, would benefit from reduced or zero VAT. E-bikes were instead categorised alongside transport powered by fuel, oil and gas as goods where the application of the standard VAT rate of at least 15% would have been mandatory.

After the Commission published its proposal, ECF and CONEBI began a joint advocacy effort for e-bikes to be incorporated in the list of goods for which reduced VAT rates can be applied by EU member states. This effort included a joint position paper and numerous meetings with Commission and member state officials to create awareness of the benefits of e-bikes for society, the environment and the cycling economy as a whole.

In the meantime, individual EU member states such as Belgium passed legislation to establish reduced VAT rates on all types of bicycles as soon as the EU’s VAT framework would allow for it and supported the bicycle sector’s demands at the European level.

Member states’ Governments have now agreed to add the supply, rental and repair of bicycles in the list of goods on which reduced VAT rates can be applied, explicitly including e-bikes. According to the special legislative procedure, once the European Parliament has issued its non-binding opinion on the proposal, the Council will formally adopt the directive. It will then be possible for member states to implement VAT reductions on bicycles and e-bikes.

“We very much welcome the result of the Council negotiations on the revision of EU VAT rates, which will make bicycles and e-bikes even more affordable and accessible for consumers in the EU,” said Jill Warren, CEO of the ECF.

“The inclusion of both conventional and electric bicycles in the list of goods eligible for reduced VAT rates adds a powerful instrument to member states’ toolbox for promoting cycling. We now call upon all EU countries to make use of this new possibility and apply reduced VAT rates for the benefit of consumers all over Europe.”

Manuel Marsilio, general manager of CONEBI, said: “It has been a long way since we started this important advocacy campaign with ECF, but we finally see a tangible outcome. This legislative decision, within the reform of VAT rates, creates a unique opportunity for governments in Europe to further support cycling in very practical terms.

“Now, we look forward to seeing concrete VAT reductions in all EU countries and will support the invaluable work of our national member associations.”

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

“When this campaign started, CIE was a voluntary Industry Club supporting ECF and, as we have transitioned, it has been an absolute priority to make sure these ongoing campaigns are properly resourced and that we are coordinated with our colleagues. Today, we see another success from these partnerships, and there are more to come.”