When can businesses charge VAT at a reduced rate?

Businesses can charge VAT at a reduced rate when they are providing qualifying goods or services that meet specific criteria set by the tax authority. An example of this is certain energy-saving materials, which are considered necessary for promoting sustainability and energy efficiency. The reduced rate makes such goods more accessible to consumers and encourages their use. This reduced rate is not applicable solely based on the type of goods, such as luxury items, nor is it tied to the business's financial year or the international sale of goods.

The reduced VAT rate is part of fiscal policy aimed at achieving societal goals, such as supporting low-income households or encouraging environmentally friendly spending. Thus, it is essential for businesses to identify which of their goods or services qualify for this reduced rate in order to apply it correctly.