The Future of VAT in Financial Services and Insurance


The Future of VAT for FSI – New Legislative Proposal Postponed

FSI VAT revision is unlikely to arrive before 2023

As part of its efforts to simplify the EU VAT rules the European Commission has launched an initiative to revise the EU VAT rules for financial services and insurance (FSI). These rules are criticized for being complex, difficult to apply and not having kept pace with the development of new (digital) services. In newly published meeting notes of the Group of the Future of VAT it has been confirmed that the FSI VAT revision is unlikely to arrive before 2023.

Authors: Michel Schrauwen, Elwin Makkus & Oscar Smeets


The current VAT rules for financial services are complex and have not kept up with the developments in the financial services industry. The lack of VAT neutrality (businesses being unable to reclaim VAT associated with VAT-exempt financial and insurance services) is causing distortion of competition, high compliance costs, legal uncertainty and increased litigation. Whilst this problem has always existed since the introduction of the VAT system in the ‘70s, it is a much bigger problem in today’s complex world. Therefore, the European Commission is working on the launch of a legislative proposal to amend the VAT rules for financial services by the end of this year. The European Commission seems to be focusing on the following two main policy options:

(I) to remove the existing exemption in order to tax financial and insurance services; or
(II) to keep the exemption, but to modify its scope through taxing only some types of services, e.g. fee-based as opposed to interest-based.


Proposal most likely postponed

The review for the VAT rules for financial and insurance services is ongoing. The summary report on the outcome of the public consultation, launched at the beginning of 2021 and closed on 3 May 2021, was published in August 2021 and is available here.

In the minutes of the 36th meeting of the ‘Group on the Future of VAT’ , held on 6 December 2021, it is announced that the timing of the new initiative to revise the EU VAT rules for financial services and insurance has been extended due to the complexity of the rules under review and the scope of this project more time is needed. It is therefore unlikely for a legislative proposal to be tabled before 2023. Initially, the Commission had communicated its ambition for a draft legislative proposal to be published before the end of 2021.

Future of VAT for FSI

Access all contributions related to Future of VAT for FSI from our Deloitte EMEA FSI Indirect Tax network.  

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Want to know more? 

Deloitte’s fintech VAT specialists will be happy to further discuss the implications of these developments with you. Also see our point of view on this initiative.

Our Deloitte EMEA FSI Indirect Tax network is set to contribute to the current debate on the revision of the EU VAT rules for financial services and insurance.
Over the coming months we will publish contributions from different parts of our network, please find all of them gathered here.

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