Joint position: temporarily reduced VAT rates for hospitality service

Published: 14/10/2020

HOTREC, FoodDrinkEurope and FoodServiceEurope are committed to ensuring a safe environment for citizens and supporting the hospitality sector navigate an unprecedented crisis. We believe a temporary ‘VAT break’ would be an extremely effective measure to support the recovery of hotels, restaurants, bars, cafes and contract caterers around Europe.

The closure of most hospitality businesses, including those providing contract catering services, around Europe in spring 2020 had an exceptionally heavy economic impact on the sector.

Beyond their economic importance and contribution, the COVID-19 crisis has shown how much hospitality establishments matter for public morale and social cohesion.

We welcome the measures and initiatives taken by the EU and its Member States to provide emergency relief for the many sectors, including hospitality and contract catering, facing exceptional economic difficulties and lack of liquidity. Amongst these measures, some EU member States (Austria, Belgium, Bulgaria, Cyprus, Czech Republic, Greece) and other European countries (UK, Norway) have introduced temporarily reduced VAT rates for hospitality services. In certain cases, existing reduced rates have been further lowered for the hospitality sector.

We believe that reduced VAT rates for hospitality and contract catering offer immediate benefits for businesses and consumers and could make the difference between survival and closure for many establishments in the coming months. The establishment of reduced VAT rates is a national competence, but EU law provides a framework for reduced VAT rates under the 2006 VAT Directive.

HOTREC, FoodDrinkEurope and FoodServiceEurope therefore ask the EU to:

  • Encourage EU Member States to reduce VAT for hospitality and contract catering services to the lowest rate (5%) authorized by EU legislation via a Recommendation
  • Temporarily give EU Member States flexibility to set one additional reduced VAT rate where needed to allow the 5% rate to apply to our sectors

The outlook for hospitality businesses today in Europe is bleak and we expect that the vast majority of businesses will be struggling to make ends meet in the upcoming months if not years to come. Past evidence from across Europe shows that reduced VAT rates for hospitality businesses are one of the most effective measures to support employment, stable consumer prices, investment and economic resilience, with a limited impact on State finances.