Title VIII: Rates

Chapter 2: Structure and level of rates

Section 2: Reduced rates

Article 98 [1]

1. Member States may apply a maximum of two reduced rates.

The reduced rates shall be fixed as a percentage of the taxable amount, which shall not be less than 5 % and shall apply only to the supplies of goods and services listed in Annex III.

Member States may apply the reduced rates to supplies of goods or services covered in a maximum of 24 points in Annex III.

2. Member States may, in addition to the two reduced rates referred to in paragraph 1 of this Article, apply a reduced rate lower than the minimum of 5 % and an exemption with deductibility of the VAT paid at the preceding stage to supplies of goods or services covered in a maximum of seven points in Annex III.

The reduced rate lower than the minimum of 5 % and the exemption with deductibility of the VAT paid at the preceding stage may only be applied to supplies of goods or services covered in the following points of Annex III:

1. points (1) to (6) and (10c);

2. any other point of Annex III falling under the options provided for in Article 105a(1).

For the purposes of point (b) of the second subparagraph of this paragraph, the transactions regarding housing referred to in Article 105a(1), second subparagraph, shall be regarded as falling under Annex III, point (10).

Member States applying, on 1 January 2021, reduced rates lower than the minimum of 5 % or granting exemptions with deductibility of the VAT paid at the preceding stage to supplies of goods or services covered in more than seven points in Annex III, shall limit the application of those reduced rates or the granting of those exemptions to comply with the first subparagraph of this paragraph by 1 January 2032 or by the adoption of the definitive arrangements referred to in Article 402, whichever is the earlier. Member States shall be free to determine to which supplies of goods or services they will continue to apply those reduced rates or grant those exemptions.

3. The reduced rates and the exemptions referred to in paragraphs 1 and 2 of this Article shall not apply to electronically supplied services, except to those listed in Annex III, points (6), (7), (8) and (13).

4. When applying the reduced rates and exemptions provided for in this Directive, Member States may use the Combined Nomenclature or the statistical classification of products by activity, or both, to establish the precise coverage of the category concerned.