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The Austrian government announced the application of reduced VAT rate of 10% on accommodation services as from 1 November 2018. These services were previously taxed at 13%, which is a second reduced rate in Austria. The standard Austrian VAT rate is 20%.
These changes are important for all companies currently automating their VAT recovery of employee expenses. Their system must be updated to make sure it reflects the updated VAT rate.
Most European countries apply a reduced rate on accommodation services. Only Denmark, Slovakia and United Kingdom apply the standard VAT rate on these services. There is a long-standing debate about the applicable VAT rate on accommodation services. Reducing rates improves unemployment rates because tourism is a labour-intensive industry, however, several scholars point out that this is only a temporary measure that would not work in the long-term.