The purchase, repair and rental of bicycles may carry a reduced VAT in the EU
Bicycles (electric or not), repair shops and the rental of these vehicles may have a reduced VAT in the countries of the European Union that so decide. The measure, a historic demand from the sector to promote sustainable mobility, has been unanimously agreed this week by the EU Finance Ministers —the so-called Ecofin—, although it still requires one more step in the European Parliament. The PSOE approved in 2018 a proposal in Congress to urge the PP Government to reduce VAT on bicycles, something that at that time could not be done pending the European directive. However, the Ministry of Finance (now of the PSOE) will not make any decision until at least February, when it expects to receive the report of the commission of experts for fiscal reform. Cycling associations and bike manufacturers ask the Executive to apply the reduction "as soon as possible".
The new European directive updates the list of goods and services to which reduced, super-reduced or even VAT-free rates can be applied. And it includes in it those who contribute to the fight against climate change, among which are bicycles, which can play a fundamental role both in the mobility of citizens and in parcel delivery. On the other hand, the rule requires eliminating tax advantages for products that harm the environment and hinder the fight against climate change, such as fossil fuels.
The entry into force of the regulations will not be immediate, given that there is still a final procedure in the European Parliament, scheduled for before next March. In any case, having been approved unanimously by the 27 Community Economy Ministers in the Ecofin, it is not expected to undergo major changes. Afterwards, the ball will be in the court of the different countries, which may or may not modify the tax in the coming years.
In Spain, the PSOE brought a non-law proposal (PNL) to the Commission for Road Safety and Sustainable Mobility in Congress in February 2018 to ask the Executive of Mariano Rajoy to reduce VAT on bicycles from 21% (normal rate) at 10% (reduced rate). The initiative was approved despite the fact that the PP voted against it, but then it could not be carried out pending the European directive. Now that the PSOE is in government, the Ministry of Finance responds to questions from EL PAÍS that it will not make any decision on modifying the tax until it receives the report from the commission of experts for tax reform, scheduled for February.
While waiting, the cycling entities celebrate the arrival of the directive. "It is one more symbol that the European trend helps us move forward and mainstream public policies in support of cycling, and position the bicycle as an environmental and economic ally, a field where it has great potential," says Laura Vergara, spokesperson for Con Bici, which brings together some 70 cycling associations from all over Spain. “In 2018, Congress urged the Government to lower that VAT. We consider that this PNL is still in force, so it must be implemented as soon as possible and maintain the dialogue between the Administrations and the cycling network”, she adds.
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A similar message is launched by Jesús Freire, general secretary of the Association of Brands and Bicycles of Spain (AMBE), which brings together the main Spanish companies: "We encourage the Government of Spain to take measures to reduce VAT on bicycles, accessories , components and services in line with the decision made by the EU finance ministers. We must be consistent with the decision made in Brussels."
A growing industry
The industry considers that with this standard "the European Union sends a very strong political message". Manuel Marsilio, director of the Confederation of the European Cycling Industry (Conebi), points out that this legislative decision "has a lot of value and fits perfectly into the European Green Deal, which is thought to be an empty box, but it must be filled with concrete things and practices, and this is a good example.” In his opinion, "the reduction of VAT on products that are green and sustainable, such as bicycles, will be a fundamental step in promoting mobility by bike". In addition, this will result in consumers having much more purchasing power, which will increase the sale of velocipedes.
According to data from Conebi, in 2019 20 million bicycles (electric or not) were sold in Europe, a number that rose to 22 million in 2020 - the sector experienced a boom after confinement - and is expected to continue growing until the 30 million units in 2030. “We believe that structural growth will continue in the coming years, because there is a new wave of people who want to embrace the bicycle and use it more, there is a vision of the bicycle that is not only sport, but also a transportation mean. In addition, there will be a growing number of companies that are going to produce more in Europe in the coming years”, concludes Marsilio.
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