The article discusses the EU’s longstanding VAT exemption for financial services, noting that the exemption was introduced in 1977 and remains in place across EU member states, Iceland, and the UK. It reviews the European Parliament’s February 2026 draft report, which calls for modernising the tax framework, highlights the 91 sector‑specific taxes that have emerged, and explores options such as abolishing the exemption for B2B services or differentiating between B2B and B2C. The piece underscores the hidden costs, market distortions, and competitiveness concerns that the current exemption creates.
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Key Takeaways
It proposes abolishing the exemption for services supplied to taxable businesses (B2B) to allow input VAT deduction and reduce hidden costs, while retaining some protection for consumers.
The report identifies 91 sector‑specific taxes, including financial transaction taxes and bank levies.
The exemption was introduced in 1977 as a practical workaround.
The withdrawal left a clear policy gap, prompting the report to call for coordinated reforms with existing financial transaction taxes and bank levies.
The exemption remains in place in EU member states, Iceland, and the UK.
Primary source
Read full article on LinkedIn by Rui MarquesThis summary was published on VATfaqs.com on 16 February 2026. It relates to VAT developments in European Union. The original source is LinkedIn Article by Rui Marques.
