The Commission has made a proposal to apply reduced VAT rates for some specific services on a permanent basis. The 27 Member States must agree to the change before it becomes law. Most of the services are already eligible for a reduced rate, but only in a limited number of Member States and only until 2010. The proposal does not represent a major change in Irish VAT.

The proposal refers to sectors where there is sufficient evidence that no real distortions to the Internal Market will occur. Services include restaurant and catering services; and labour-intensive services. The application of reduced rates is optional.

The proposal for a Council Directive, which will be required to amend the VAT Directive, has been reproduced at Section 2.08.