VAT Working Group

The mission of the VAT (Value Added Tax) working group is to examine the developments proposed by the EU in VAT legislation and take appropriate actions. This includes understanding the EU plans on VAT, keeping members of the European Affairs Committee (EAC) informed, and acting upon these plans to influence EU actions.


Article 132.1.a of the Directive 2006/12/EC of 28 November 2006 on the common system of value added tax provides a VAT exemption for public postal services.

This concept gave rise to differing interpretations within the European Union.

Asked for a preliminary ruling by the British High Court of Justice following a litigation between Royal Mail and TNT Post Ltd, the ECJ interpreted the scope of VAT exemption on public postal services in a judgement on 23 April 2009.

The ECJ concluded that the concept of public postal services must be interpreted as referring to operators -whatever their legal status- who are committed to provide in a member state all or part of the universal service as defined in article 3 of the postal Directive. Indeed, article 132 of the VAT Directive 2006/112/EC of 28 November 2006 provides for exemptions for some activities of general interest. The Court therefore considers that the operators of the universal postal service, who meet the population’s basic needs by providing affordable postal services, may benefit from the VAT exemption. The judges believe that this interpretation is not contrary to the principle of fiscal neutrality since the services provided by the universal service provider are made within a legal system substantially different from the one in which an operator like TNT can perform such services due to the obligations which are binding on the US provider (obligation to collect and distribute six days a week, affordable prices, services to the entire territory, availability of contact points, ...).

On the scope of the exemption, the Court states that all services provided by public postal services cannot be exempted. The only services that can be exempted are those belonging to the universal service offer catalogue. Therefore, only the services included in the universal service and provided in the general interest may be exempted from VAT. The judges consider that «the services for which the terms have been negotiated individually», meeting special needs of economic operators, are dissociable from the service of general interest and are thus subject to VAT.

This decision binding on all member states poses a practical problem for some given the existence of different universal services among the member states.

In addition, a new concept (services for which the terms have been negotiated individually) rises and does pose new problems of interpretation between the different members states.

The European Commission has communicated to the VAT Working Group some guidelines on this subject in March 2011. These guidelines provide no precise answer to these questions, and it seems the Commission lets each member states interpret in its own way the TNT case law … Most of the member states seem to be satisfied with the status quo according to the latest exchanges of views within the PostEurop VAT WG (meeting of May 2011 and confirmed in April 2012).

Nowadays, VAT WG is focused on the analysis of the Copenhagen Economics study on the economic consequences on possible reforms of the EU VAT-treatment of the public sector (including the VAT-treatment of public bodies and VAT exemptions in the public interest which regards the postal sector too). The study proposed the following three reforms options, each one with two variants:

1. Full taxation with following two alternatives:

  1. In the first variant of this option, the VAT rates of previously exempt or non-taxable services are set to the standard VAT rate;
  2. In the second variant, the VAT rates of the previously exempt or non-taxable services are set to the lowest reduced rate in the individual Member State or 5% if no reduced rate exists.

2. Refund system with following two alternatives:

  1. In the first variant, all of the exempt or non-taxable services qualify for a refund of their input VAT;
  2. In the second variant, the refund Is only available for health, education, public administration and cultural service sector.

3. The option according to which the special rules relating to public bodies (Article 13 of the VAT Directive) would be deleted, while keeping tax exemptions in the public interest with following two alternatives:

  1. In the first variant of this option, the previously exempt or non-taxable services become taxable at the standard VAT rate;
  2. In the second variant, the services become taxable at the lowest reduced VAT rate applicable in the member States or 5% if no reduced rate exists.  

The European Commission, DGTAXUD, organized a Conference in Venice on 17th – 19th April, 2013, in order to analyse the impact deriving from the solution proposed by Copenhagen Economics. The chair of PostEurop VAT WG was invited to take part in the third panel discussion of the conference concerning “What are the sector where major distortions arise on the output side? Is a sectorial approach towards an extension of the scope an appropriate way forward?”.

During the last VAT WG meeting, held in Rome in April 5th, 2013, which was attended by most of the VAT WG members, the group analysed the solution proposed by Copenhagen Economics and agreed on the necessity of a further step in deep analyses of the postal sector situation. 

 In October 14, 2013 the EU commission launched a public consultation on its website on the “Review of the existing VAT legislation on public bodies and the tax exemptions in the public interest”. The final closing date was the 25th of April, 2014. The VAT WG sent an answer to the EU commission. The answer did not include answers to the single questions of the public consultation but was a letter with comments to the EU Commission’s public consultation paper. The letter, a high level paper, wanted to draw the attention to the consequences of introducing VAT on universal postal services and that a further analysis of the impacts would still be needed.

The European Commission released a summary report of the outcome of the above mentioned public consultation on December 18, 2014. Almost 600 contributions were received; a relative large number of responses were related to the postal sector reflecting different positions regarding its VAT treatment. The first group of contributors called for an abolishment of the current tax exemption in order to create a level playing field also discussing a reduced VAT rate for all postal services or an “option to tax” for all member states. The other opinion that the current exemption should be maintained reflected of course the issues expressed in the comments contributed by PostEurop.

A further issue the VAT WG discussed in depth was the EU proposals of the Directive on the VAT treatment of vouchers (=Voucher Directive) and the possible impact of the including of stamps. Some of the operators had talks with their tax administrations on this topic. According to most of them stamps should not be included in the future directive.


Updated on 13 February 2015

Carlo Sauve
Poste Italiane S.p.A.
T: +39 0659584788
F: +39 0659588785
Annelie Rietveld

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European Commission, Taxation and Customs Union

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