What changed between the plenary report and the adopted text

Addressing the VAT regime for financial services

14. Notes that the VAT exemption for financial services dates back to 1977, serving to avoid technical difficulties in applying VAT to complex financial services, which was considered administratively unworkable; acknowledges that the original technical justification for the VAT exemption could now be addressed by the realities of technological progress and digitalisation;

15. Observes that the exemption does not necessarily constitute an advantage for financial institutions, as it prevents them from recovering VAT; takes the view that the status quo perpetuates market distortions, can create a lack of transparency and increase costs on consumers, reinforces the self-supply bias in the financial sector and creates competitive disadvantages compared with institutions from non-EU countries;

16. Stresses that VAT exemptions are often granted to activities of general interest in recognition of their essential social function; underlines that certain core financial services – notably payment services, deposit-taking and basic credit provision – can perform a comparable quasi-public utility function by safeguarding savings, enabling economic exchange and ensuring that people and businesses can participate safely in the economy;

18. Notes that, under Article 11 of the VAT Directive, VAT grouping remains optional for Member States and is limited by territorial constraints, creating legal and practical obstacles for cross-border groups active in financial services;

19. Emphasises that, despite the use of VAT grouping and cost-sharing arrangements in some Member States, the VAT exemption, combined with differing compensatory national tax rules, like insurance premium taxes, creates a complex and fragmented tax landscape, making cross-border tax compliance costly and increasing firms’ operating expenses; stresses that clearer VAT definitions and simplified rules are needed to reduce these burdens, ensure consistent application of rules across the EU, facilitate cross-border activity and support innovation;

20. Notes that VAT grouping, which can reduce administrative burdens for, and improve the efficiency of, financial institutions, is currently applied unevenly across Member States and generally limited to entities established within a single Member State; highlights that greater convergence in the application of VAT grouping could reduce fragmentation and legal uncertainty in the internal market and facilitate cross-border financial services activity;

21. Calls on the Commission to encourage Member States to implement VAT grouping in a consistent manner and to explore options for a clearer legal framework, including the possibility for cross-border VAT grouping; stresses that broader use of VAT grouping for financial and insurance services must be in line with corporate tax rules, notably those on transfer pricing, and must be accompanied by binding anti-abuse safeguards to prevent fraud and tax avoidance, intra-group VAT leakage and cost-sharing abuse;

22. Notes that the VAT Directive lacks specific provisions for emerging financial instruments, including crypto-assets, decentralised finance and fintech; highlights that in addition the Directive does not address the VAT treatment of derivatives and that the treatment of investment funds remains divergent across Member States; notes that this has led to diverging national interpretations of VAT rules, legal uncertainty for service providers and uneven treatment between traditional and new financial services and risks hindering innovation and competitiveness;

23. Emphasises that a modern tax framework should support innovation in fintech and digital finance and avoid creating regulatory disincentives for new market entrants; calls on the Commission to clarify the VAT treatment of emerging financial services in order to ensure technological neutrality and a level playing field across the EU;

24. Considers that a broad and undifferentiated VAT exemption for the entire financial sector raises questions regarding the overall consistency and balance of the tax system; underlines that a reform of the VAT exemption could reduce distortions and the level of irrecoverable VAT without creating disproportionate administrative complexity; notes that options for removing the VAT exemption could effectively remove the irrecoverable VAT by allowing financial corporations to fully reclaim the VAT that they pay on goods and services used in their operations; underlines that this would eliminate the current bias towards bringing services in-house rather than outsourcing them, which can limit a company’s ability to specialise, access external expertise, and innovate; recognises that this reform could also level the playing field as regards other jurisdictions and strengthen the international competitiveness of EU financial institutions;

25. Recalls that VAT is a harmonised tax framework at EU level, although Member States retain some scope for implementing it; recognises, therefore, that a reform of the VAT system for financial services should be addressed at EU level;

27. Notes that any proposal for revising the VAT framework should be based on an in-depth analysis at macroeconomic level and comprehensive mapping of national bank tax and levies; emphasises that such an analysis should take into account the administrative implications for financial services, the interaction between existing national bank taxes, financial sector levies and the VAT system, and the impact on the single market;

28. Underlines that any changes to the VAT treatment of financial services must carefully assess the impact on services provided to retail consumers, particularly low- and middle-income households, and avoid any extra overall costs;

29. Calls on the Commission, as part of a possible reform of the VAT exemption, to assess the feasibility of replacing national insurance premium taxes by means of fully integrating insurance services into the VAT system;

Promoting a more coherent tax framework for the financial sector

31. Recalls, in this regard, the 2020 agreement between Parliament, the Council and the Commission on a roadmap for introducing new own resources, including an FTT based on the results of an impact assessment;

32. Acknowledges the lack of progress made on the FTT proposal in the Council, despite extensive debate, both under unanimity and enhanced cooperation, and takes note of the Commission’s announcement about the withdrawal of the FTT proposal in its 2026 work programme;

33. Takes the view that regular assessments of the economic impacts and the continued relevance of tax policy in the financial sector are crucial, in order to avoid unintended or lasting distortions to financial markets; welcomes the fact that the Commission is carrying out a comprehensive analysis of the potential impact of overall financial sector taxation on market functioning, cross-border investment, and the competitiveness of EU financial markets;

34. Emphasises that tax rules for the financial sector should be simplified and ensure that the sector makes a fair and sound financial contribution, and should be clear, transparent and predictable in order to reduce fragmentation, enable investment and cross-border activity while guaranteeing a high level of consumer protection; stresses that these rules should improve efficiency and capital allocation, safeguard market stability and competitiveness, and mitigate compliance costs, particularly for retail consumers and small and medium-sized enterprises;

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35. Instructs its President to forward this resolution to the Council and the Commission.